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FREEandCLEAR Mortgage Expert Blog

Welcome to the FREEandCLEAR Mortgage Expert Blog! The FREEandCLEAR Mortgage Expert possesses over 40 years of mortgage industry experience and uses this blog to bring you insights on the latest mortgage market news and developments. We also use the FREEandCLEAR Mortgage Expert Blog to launch and highlight features, functionality and content offerings on FREEEandCLEAR.com so sign up below to receive blog updates via email or check back frequently.

 
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POSTED: Monday April 17, 2017

At first thought there does not seem to be a common thread between mortgages and Earth Day but when you consider the volume of paperwork involved in the mortgage process the connection becomes more clear.  Mortgage document overload represents a significant concern for both borrowers and the environment.   Mortgage paperwork can overwhelm even the most experienced… Read More

POSTED: Monday April 17, 2017

At first thought there does not seem to be a common thread between mortgages and Earth Day but when you consider the volume of paperwork involved in the mortgage process the connection becomes more clear.  Mortgage document overload represents a significant concern for both borrowers and the environment.

 

Mortgage paperwork can overwhelm even the most experienced borrowers.  In some cases borrowers are required to review and sign over 50 loan documents.  According to the recent FREEandCLEAR Mortgage Survey, when asked to select the most challenging part of the mortgage process, the number one response was paperwork which garnered 56% of responses — more than four times the second place response of borrower qualification.

 

Borrowers have good reason to feel confused and burdened by mortgage paperwork.  The table below outlines an extensive list of documents that borrowers may encounter over the course of the mortgage process.  The table also details the approximate number of pages for each document.  Although mortgage documents and length vary depending on several factors such mortgage program and type as well as borrower location, the table illustrates how borrowers can drown under a sea of paperwork.

 

Mortgage Document List

Mortgages require a lot of paperwork

 

Most of the documents listed in the table serve a legal or regulatory purpose and are intended to inform or protect the borrower; however, we may have reached the point where more is less when it comes to mortgage paperwork.  The mounds of documents and pressure to close can create a challenging dynamic for borrowers.  In the worst case scenario, borrowers eager to close their mortgage sign whatever papers are put in front of them at the closing table without fully understanding the documents.

 

While mortgage paperwork poses a confusing and cumbersome challenge for borrowers it also has significant environmental ramifications.  In recognition of Earth Day, we quantified how mortgages impact the environment.

 

According to a recent Federal Reserve Bulletin on residential mortgage lending, there are on average 7.8 million mortgages a year.  This figure is based on the average number of purchase, refinance, home improvement and multifamily mortgage originations between 2011 and 2015, the most recent year for which data are available. 7.8 million is a lot of mortgages and that figure does not even include the number of loan applications that did not successfully result in a closed loan, which was almost five million in 2015.

 

When you multiply the large number of mortgages by the high number of mortgage documents the product is a massive amount of paperwork and tremendous environmental impact. Specifically, 7.8 million mortgages per year times 280 pages of paper per mortgage yields almost 2.2 billion sheets of paper consumed by mortgages annually.

 

To quantify the environmental impact of 2.2 billion sheets of paper we used the Environmental Paper Network Paper Calculator.  (The Environmental Paper Network (EPN) is an organization that works for social and environmental transformation in the production and consumption of pulp and paper.  For more information visit www.papercalculator.org)

 

According to the EPN Calculator, 2.2 billion sheets of paper equals approximately 4.4 million reams, or 11,000 tons, of paper.  The EPN estimates that 11,000 tons of paper require over 41,000 tons of wood to produce, which is equivalent to approximately 264,000 trees.  So in short, mortgages consume approximately 264,000 trees annually.

 

Mortgages use a lot of trees

Over 260,000 trees are consumed by mortgages annually

 

Although double-sided printing and digital documents reduce paper consumption in the mortgage process these practices are more than offset by the millions of loan applications that did not result in a mortgage as well as lenders’ internal document retention requirements.  In light of these factors we believe that 264,000 tree consumption figure is likely conservative.  While the increasing use of recycled paper is certainly positive, there is little doubt that the mortgage industry’s impact on the environment and trees is profound.

 

And the environmental impact of mortgage paperwork is not limited to trees.  In addition to wood usage, paper production involves considerable energy and water consumption and generates significant greenhouse gas emissions and waste.  The table below provides a more complete estimate of the environmental impact of 2.2 billion sheets of paper and illustrates that mortgage documentation is as tough on the planet as it is on borrowers.

 

Environmental impact of mortgage documents

Based on 2.2 billion sheets of paper. Source: Environmental Paper Network

 

So what steps can be taken to address both the borrower overload and environmental impact caused by mortgage paperwork?  The adoption of online and mobile technologies that permit borrowers to digitally upload their financial paperwork is a good start but these technologies are not widely implemented and do not change the number of documents involved in the mortgage process.  Changing regulations that prohibit the use of digital signatures for most mortgages could also have a positive impact but raises a different set of borrower concerns.

 

“Less paperwork” is the obvious answer to both borrower and environmental challenges but it seems unlikely that government regulators will eliminate or streamline any documents that are designed to protect borrowers, especially as the long-term effects of the the mortgage crisis continue to linger.

 

Big problems usually lack easy solutions and that certainly applies to the issue of mortgage paperwork.  Despite meaningful obstacles, lenders and regulators have a tremendous opportunity to collaborate to implement solutions that address mortgage paperwork overload and move the industry forward.  Borrowers and mother nature are counting on it.

POSTED: Thursday April 13, 2017

There are multiple factors that determine if your mortgage process was positive and successful.  Mortgage rate, closing costs, timeline and lender customer service are all important inputs to your mortgage experience.  While all these components are important, there is perhaps no better measure of the mortgage experience than borrower satisfaction with their lender.   In a way, borrower lender… Read More

POSTED: Thursday April 13, 2017

There are multiple factors that determine if your mortgage process was positive and successful.  Mortgage rate, closing costs, timeline and lender customer service are all important inputs to your mortgage experience.  While all these components are important, there is perhaps no better measure of the mortgage experience than borrower satisfaction with their lender.

 

In a way, borrower lender satisfaction encompasses all elements of the mortgage process.  If you are unhappy with your mortgage rate or final closing costs, you are unlikely to be happy with your lender.  If you missed your mortgage closing deadline, you probably blame it on the lender even if it is not their fault.  When customer service fails to meet expectations, lenders definitely bear the brunt of borrower frustrations.

 

Given its importance as a broad barometer of the mortgage experience, measuring borrower satisfaction with their lender was a key objective of the FREEandCLEAR Mortgage Survey.  The survey results indicate the lenders are doing a highly satisfactory job of meeting borrower expectations.

 

When asked to rate how satisfied they are with their mortgage lender on a scale of 1 to 10, with ten being the highest level of satisfaction, a robust 78% of respondents selected 7 or higher.  Furthermore, the four highest lender satisfaction options achieved the four top-ranked responses, in order.  The highest borrower satisfaction rating of 10 garnered 24% of responses followed by a 9 rating which drew 21% of responses and an 8 rating with attracted 20% of responses.

 

Borrower satisfaction with mortgage lenders

Borrowers are satisfied with their mortgage lender

 

Although the results are generally positive, there are some modest causes for concern.  The middle borrower satisfaction rating of 5 registered 9% of responses, the fifth most popular choice.  Certainly no lender strives for mediocrity when it comes to borrower satisfaction.  Additionally, the lowest rating of 1 was selected by 3% of respondents, exceeding the second, third and fourth lowest rating options.

 

So although a significant majority of borrowers seem to be very satisfied with their mortgage lender a meaningful number of borrowers are only moderately satisfied and a relatively small number are highly unsatisfied.  These results show that some lenders have the opportunity to improve the customer experience and level of service they deliver to borrowers.

 

These issues, however, are more than outweighed by the overwhelmingly positive results of the survey.  The high level of borrower satisfaction is another example of the FREEandCLEAR Mortgage Survey showing borrowers with a positive opinion of their lender.  Other survey findings showed borrowers with a high level of trust in their lender as well as a very favorable assessment of how knowledgeable their lender is about the mortgage process.  In general, the survey shines a very complimentary light on an industry that had been much-maligned in the wake of the mortgage crisis.

 

We will continue to provide a detailed analysis of each survey question on our blog in the coming weeks and you can review the full results from the FREEandCLEAR Mortgage Survey to better understand how borrowers think about and experience the mortgage process.

POSTED: Thursday April 06, 2017

The turmoil in the mortgage market over the past several years resulted in significant personnel turnover at lenders.  Many lenders ceased operations and droves of experienced mortgage professionals changed careers or retired in response to the industry downturn.   At the same time many mortgage veterans were leaving the industry, new rules and regulations were adopted… Read More

POSTED: Thursday April 06, 2017

The turmoil in the mortgage market over the past several years resulted in significant personnel turnover at lenders.  Many lenders ceased operations and droves of experienced mortgage professionals changed careers or retired in response to the industry downturn.

 

At the same time many mortgage veterans were leaving the industry, new rules and regulations were adopted that made the mortgage process more complicated.  We are all familiar with borrower anecdotes about loan officers that did not know what they were doing, leaving us to question if the “brain drain” of knowledgeable professionals has negatively impacted the mortgage experience for borrowers.

 

The FREEandCLEAR Mortgage Survey explored this issue and attempted to quantify if negative borrower experiences with mortgage professionals were the rule or the exception.  We asked borrowers to rate how knowledgeable their lender was about the mortgage process on a scale of one to ten, with ten being the most knowledgeable, and the results reflected very positively on today’s mortgage lenders.

 

How smart are mortgage lenders?

According to borrowers, lenders are highly knowledgeable about the mortgage process

 

The survey showed that an astounding 86% of respondents selected seven or higher when asked how knowledgeable their lender was.  The highest rating option of 10 led the way with 34% of borrowers followed by 9 with 22% of borrowers and 8 with 20% of borrowers.  In fact, the five highest rating options garnered the top five borrower responses, in order.

 

So despite all the changes in the mortgage industry and outflow and inflow of professional talent, most borrowers think their lender is pretty smart when it comes to the mortgage process.  

 

The positive borrower sentiment could be attributable to several factors.  First, many of the most experienced mortgage professionals managed to survive the market swings and remain in the industry.  Second, many high-quality professionals have returned to the industry as the mortgage market has rebounded.  Finally, new licensing rules require more ongoing lender training and education.  While these regulations may be a pain, perhaps they have produced more knowledgeable and informed lending professionals, a hypothesis certainly supported by the FREEandCLEAR Mortgage Survey.

 

Lenders are rightly expected to be highly knowledgeable about the mortgage process but it is still encouraging for borrowers to validate this point so emphatically.  Working with an experienced, knowledgeable lender can make the difference between a closed loan or a frustrated borrower.  The findings of the FREEandCLEAR Mortgage Survey suggest that most borrowers work with lenders that know what they are doing which is win-win for borrowers and lenders. 

 

We will continue to provide a detailed analysis of each survey question on our blog in the coming weeks and you can review the full results from the FREEandCLEAR Mortgage Survey to better understand how borrowers think about and experience the mortgage process.

POSTED: Thursday March 30, 2017

It has been almost nine years since the darkest hour of the real estate crisis.  While the real estate and mortgage markets have improved significantly since 2008, many borrowers remain scarred from devastating events of that era.  Even if the the market collapse did not affect you directly, you probably know someone who experienced the traumatic impact of a… Read More

POSTED: Thursday March 30, 2017

It has been almost nine years since the darkest hour of the real estate crisis.  While the real estate and mortgage markets have improved significantly since 2008, many borrowers remain scarred from devastating events of that era.  Even if the the market collapse did not affect you directly, you probably know someone who experienced the traumatic impact of a foreclosure, short sale and bankruptcy.  Although no single party was responsible for the real estate implosion — banks, regulators and borrowers all share the blame — mortgage lenders attracted the most ire from borrowers and the general public.  

 

In light of the intense anger and frustration that was, and continues to be in some cases, directed at lenders, we wanted to use the FREEandCLEAR Mortgage Survey to understand how much borrowers trust mortgage lenders today.  How much faith do borrowers put in their lender? Or in other words, how much have the deep scars of the real estate crisis healed?

 

When asked how much do you trust your lender on a scale of 1 to 10, with 10 being the highest level of trust, a whopping 70% of survey respondents selected 7 or higher.  Additionally, the four highest rating options garnered the top four responses with a trust rating of 8 coming in on top with 21% of responses and the highest rating of 10 coming in second with 20% of responses. A lender trust rating of 9 out of 10 came in third, garnering 16% of responses.  

Borrower trust in mortgage lenders

Borrowers trust mortgage lenders more than you would expect

 

We have to admit that these results surprised us as many borrowers continue to deal with the aftermath of the real estate collapse.  Although the deepest point of the crisis occurred almost a decade ago, borrowers continue to be impacted by the residual effects of impaired credit scores, toxic mortgages and to a lesser degree negative equity in their homes.

 

The unexpected FREEandCLEAR Mortgage Survey findings that show borrowers with a high level of trust in their lenders could be attributable to several factors.  First, prompted by new government regulations or on their own volition, a lot of lenders have cleaned up their act.  Some of the worst lenders and individual offenders involved in the mortgage market collapse have left the industry so there are fewer bad actors to mis-trust.  Additionally, many of the mortgage programs such as negatively amortizing option ARMs that produced so much borrower wreckage have been eliminated from the marketplace.  While both lenders and borrowers express dissatisfaction with increased mortgage regulations, there is little doubt that these reforms stabilized the mortgage market and in turn potentially helped restore borrowers’ trust in lenders.   

 

A second possible explanation for the positive responses to this question could be personal bias or blind spots.  Borrowers may not trust the mortgage industry on the whole or lenders in general but they trust their lender.  Put differently, your mortgage lender is shady but I trust mine.  After all, who wants to admit that they made a poor decision when they selected their lender?

 

Whatever the reason or rationale, borrowers trusting mortgage lenders is a positive development.  Getting a mortgage and buying a home remains the largest financial commitment for most borrowers so working with a lender that you trust to guide you through an overwhelming and sometimes confusing process is crucial.  Although mortgage lenders have a significant opportunity for improvement in both perception and practice, the findings of the FREEandCLEAR Mortgage Survey show that in the eyes of borrowers, the industry has come a long way since its darkest days, which we all can agree is a good thing. 

 

We will continue to provide a detailed analysis of each survey question on our blog in the coming weeks and you can review the full results from the FREEandCLEAR Mortgage Survey to better understand how borrowers think about and experience the mortgage process.

 
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