A study focused on consumer attitudes about home ownership was released last month. The focus was centered on the mortgage application process. The big headline from the study was that 1 in 3 consumers stated they would consider obtaining a mortgage from Walmart. The headlines seem to blare that this was quite the revelation…33% of people would consider a Walmart mortgage! My thought was…why so low?
Later in the study, the focus turned to consumer frustration with the mortgage process. Beyond the usual complaints about interest rates, taxes and escrow…the main issue is execution of the process. Slow execution. I agree totally. Why does it take 4-6 weeks to obtain a mortgage? In the 1980′s I would not have questioned that it takes so long for the paper to flow through the process. Today, I can’t figure out why the mortgage industry has not trimmed this time line. I have been involved in the world of real estate finance since the 1980′s, and I venture to say it takes as long today to close on a mortgage as it did in 1984 when I purchased my first home!
Lets contrast this with the second biggest purchase most people make. Over the holidays, my daughter was home from college and we needed to address her driving situation. After she did her shopping, she selected a nice used vehicle from a local dealer. I negotiated with the dealership by email until a deal was struck. About two hours later we went to the dealership, completed some paperwork, and within an hour, drove away with the car and a car loan. I can make a case that this car loan is much more risky than a mortgage. Yet, all the underwriting and documentation can be completed in one hour!
Any wonder the mortgage industry has a problem with consumer satisfaction?
When you think of Walmart you think of low prices first. Convenience..maybe second. Much of Walmart’s success is based on speed though. Quick inventory turns are a part of how you keep prices really low. Does anybody not think Walmart (or any non-bank) mortgage provider could not speed up the approval and funding process? I can hear the banks now…they believe we are willing to take a longer journey for that mortgage due to the professional, personal service we receive. Stop me from laughing please! This study says 56% of its participants are laughing with me.
The final conclusion of the study is that consumers want price, service and trust. Service means not waiting 3-4 weeks to find out if you are approved. I can name several non-mortgage companies that can offer all three of these benefits if they chose to commit to offering mortgages. The question left is who will challenge the banks model first?