by Broderick Perkins
(1/3/2013) - Perhaps Costco led the way with non-bank mortgages, but many consumers would be willing to take on mortgage by Wal-Mart, PayPal and other non-bank lenders, according to a recent survey by a financial services industry consulting firm.
The Carlisle & Gallagher Consulting Group's (CG) online, September 2012 survey of 618 U.S. consumers, reveals 80 percent would consider a mortgage from a non-bank.
More specifically, one in three would consider a Wal-Mart mortgage and nearly half, 48 percent would consider a PayPal home loan.
Non-bank mortgages are not unprecedented.
Earlier this year, Issaquah, WA-based Costco Wholesale Corp. teamed up its online operation with New Jersey-chartered First Choice Bank and to create Costco Finance and offer both home purchase and refinance mortgages for civilians and veterans.
The members-only warehouse giant promised competitive mortgage rates and other savings - a cap of $600 to $750 on lender fees for certain members and up to $5,000 over the life of a loan.
Just as Costco capitalizes on buying and selling in bulk, the big box claims to have created mortgage discounts from volume. It has 66 million card-carrying members.
Future non-bank mortgage lenders are likely to follow Costco's approach to financial services. It also offers members auto, home, health and dental insurance; savings and CDs; online investing and small business financial services.
Along with its online merchant transaction services, PayPal offers money transfers and credit cards.
Neither company has admitted to plans to make home loans.
CG's survey found that while consumer satisfaction with primary banks ranked 81 percent, consumer frustrations with current mortgage costs and services is what would drive them to alternative home loan sources.
The survey found:
• High interest rates, high payments, taxes and escrow, were the top three most frustrating issues regarding consumers' current mortgages.
• Most consumers, 56 percent, blame slow execution as one of the most painful aspects of the mortgage process.
• Nearly one in three consumers, 32 percent, said difficulty communicating; 31 percent said inability to track the status of their mortgage application and 26 percent said untrustworthy advice, were conditions that frequently created problems in the mortgage process.
Over the years, non-bank mortgage company Quicken Loans has gained market share due largely to its high customer satisfaction ratings.
The year 2012 marked the third year in a row J.D. Power and Associates' "U.S. Primary Mortgage Origination Satisfaction Study" ranked Quicken Loans tops in customer satisfaction.
Quicken beat out mortgage giants Wells Fargo, Bank of America and Chase, the nation's three largest mortgage lenders.
"Consumer attitude is driven by three things, price, service and trust," said Doug Hautop, Senior Manager and Lending Practice lead for CG.
"Institutions looking to gain market share must target customer values instead of traditional asset segmentation," Hautop added.
One can only hope.
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