Nearly one in three borrowers taking out a new mortgage in 2006 experienced problems during the origination process, including errors in closing documents, miscommunication of loan terms, or an unresponsive or unavailable loan consultant or mortgage broker

That’s according to a new survey of 4,115 borrowers who originated loans in the first nine months of the year by J.D. Power and Associates.

The market research firm said customer satisfaction is important to mortgage lenders because customers from the five highest-ranking lenders make 20 percent more referrals and are “significantly more likely” to do repeat business with their existing lender.

Although interest rates, fees and closing costs drove the selection of lender for 28 percent of those surveyed, 17 percent said their previous or existing relationship with a lender was a “strong motivator.”

Refinanced mortgages accounted for 45 percent of the loans in the survey, with nearly 70 percent of borrowers refinancing with their current lender.

Of the 28 percent of those surveyed who experienced some problem during the mortgage origination process, 40 percent said their loans closed late because of those problems, which had a major impact on overall satisfaction scores.

The speed of approval “is a critical influence on overall satisfaction,” J.D. Power said, with customer satisfaction dropping nearly 100 points on a 1,000-point scale when borrowers have to wait seven or more days for their loans. Two-thirds of those surveyed said they received final approval in less than a week.

Satisfaction levels also drop when customers are asked to provide additional information and documentation after submitting a completed loan application. Of those surveyed, 56 percent said they were asked more than once to produce additional information.

The survey found more than 40 percent of borrowers visited a lender’s Web site or an online third-party service to gather information. While customer satisfaction is highest when borrowers deal with their lenders in person, customers managing the process online are more satisfied than those interacting with a person over the phone, the survey found.

One of the biggest sources of dissatisfaction in mortgage origination is not keeping commitments, the survey found. Top-performing lenders framed expectations, closed loans on schedule and provided accurate information on closing costs, payments and payoffs.

SunTrust Mortgage ranked highest in the survey with a score of 782 out of 1,000. Bank of America (781), Wachovia (774), Wells Fargo (766) and Chase (762) were ranked among the top five lenders.

The study found that overall satisfaction among those surveyed was up 7 percent from 2005.

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Send tips or a Letter to the Editor to matt@inman.com or call (510) 658-9252, ext. 150.

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