February 5, 2015
The Consumer Financial Protection Bureau has issued a report on Consumers’ Mortgage Shopping Experience: A First Look at Results from the National Survey of Mortgage Borrowers. The CFPB’s key findings include
a. Almost half of consumers who take out a mortgage for home purchase fail to shop prior to application; that is, they seriously consider only a single lender or mortgage broker before choosing where to apply. The tendency to shop is somewhat higher among first-time homebuyers.
b. The primary source of information relied on by mortgage borrowers is their lender or broker, followed by a real estate agent. Fewer consumers obtain information from outside sources, such as websites, financial and housing counselors, or personal acquaintances (such as friends, relatives, or coworkers).
c. Most consumers report being “very familiar” with the types of mortgages, available interest rates, and the process of taking out a mortgage. Those who are unfamiliar with the mortgage process are less likely to shop and more likely to rely on real estate agents or personal acquaintances.
d. A sizeable share of borrowers report that factors not directly related to mortgage cost, including the lender or broker’s reputation and geographic proximity, are very important in their decision making. Borrowers who express such preferences are much less likely to shop. (10)
I had discussed the CFPB’s new mortgage shopping tool previously. It has been getting bad press from the lending industry which has been calling for its demise. Seems to me the industry is overreacting. Given the lack of comparison shopping that borrowers engage in, a tool that provides them with interest rate comparisons (even if it does not yet have an Annual Percentage Rate comparisons) seems to be a good thing. The tool is in beta, so it is likely to give more and more information over time. My bottom line: more info is better than less.| Permalink