A series of specific questions from the National Housing Survey for the first quarter asked consumers who also recently bought a home about their experiences with getting mortgages during the pandemic. Fannie Mae was a little surprised by some of the results.
Tim McCallum and Jenny Shen, vice president of customer management solutions for the company’s single-family division, wrote about these findings on Fannie Mae’s Perspectives blog. They said that the questions specifically asked about satisfying mortgages and Has the pandemic prompted home buyers to use mortgage resources online? “We wanted to better understand how the pandemic may have changed the digital behavior of consumers looking for mortgages, as has happened in many other industries,” they said.
They found that consumers were generally satisfied with their mortgage lending experience, even though lender staff worked remotely and processed record volumes of loan disbursements. Eighty-eight percent of recent home buyers said they were happy, which is unchanged from those surveyed a year earlier. The authors say these results are consistent with Fannie Mae’s survey of mortgage lender sentiment for the first quarter of 2021, in which 78 percent of lenders said the quality of consumer mortgages had improved or remained the same during the pandemic.
Recent home buyers (those who bought between May 1 and December 1, 2020) were slightly more satisfied with traditional banks (90 percent) and credit unions (93 percent) than mortgage banks (85 percent). Also, when segmenting by size small and medium-sized lenders had significantly more “very satisfied” customers compared to larger credit institutions.
However, to the surprise of the company, the survey showed only a marginal increase in internet usage compared to the 2018 survey. The authors say there are differences between consumer segments, but the results show that “one size fits all.” the approach may not meet the needs of all consumer groups.
Fannie Mae predicted that the COVID-19 crisis would push many consumers to complete all mortgage tasks online, but the percentage of such only increased from 7 percent in the previous year to 12 percent. Most home buyers said they needed the opportunity to speak with a mortgage specialist throughout the process. The authors say that mortgages are expensive and somewhat difficult to obtain, so reluctance to give up private conversations makes sense.
They also found that first-time home buyers were more likely to allow electronic access to their records than repeat home buyers (41 percent and 33 percent, respectively). This could indicate a future shift in digital use, as younger consumers, who are more accustomed to providing digital apps and online businesses’ access to information, will buy more homes.
Among those who used digital channels, 57 percent said the pandemic did not affect their actions while 38 percent said it influenced their decision. The tasks for which the use of digital technology has indeed increased since 2018 were informational and performed at an early stage, such as exploring the mortgage process and options, but some later (and possibly more complex) tasks, including prequalification or obtaining updates on their loans were used less. Overall, for most tasks, online preferences were still around 50 percent or lower, with the exception of financial filing, which was nearly 70 percent. The authors stated that this was further confirmation of the willingness of the borrowers to continue personal assistance and support throughout the process.
Digital use levels also varied across race and income levels. Of the homebuyers surveyed in 2020, Asian and Black respondents with higher incomes showed a stronger preference for online use, while low-income consumers and Hispanics were more likely to complete tasks in person or over the phone. Again, this is contrary to the “one size fits all” approach and indicates that businesses and lenders need to be alert to the diverse needs of individuals and groups.
The digital transition is still gradual, with some segments showing different online service / personal needs, according to the authors. Since buying a home is an infrequent and complex expense, switching to online channels seems like an imperfect solution for many borrowers who have questions and want to make the right choice. This high cost item may also require some consumers to have a higher level of service than they might expect from their day-to-day online purchases.
McCallum and Shen write that Fannie Mae will continue to track consumer preferences. as demographic changes and more young consumers move towards home buying to see if online preferences are increasing or not. They conclude that “the industry may need to think about ways to further streamline and simplify the process for consumers, and make costs, rates and information more transparent so that consumers feel comfortable with a fully interactive mortgage experience.”