Life is about tradeoffs. And a great price or good service is a tradeoff that happens all the time, including in the mortgage market.
In the mortgage world, it happens when lenders advertise a rate that beats everyone else.
Unless they’re a megabank like RBC, TD or the like, they can get more mortgage applications than their systems and personnel can handle.
Approval times go from a few days to a few weeks, or longer.
That’s been the case this year, particularly for some banks and credit unions that promoted market-leading rates, only to be overwhelmed by the response. In one case we’re aware of, a credit union was taking over three weeks to approve or deny applications.
Some clients were waiting almost a month, only to get the news they were declined!
“A 15-day turnaround is absolutely ridiculous,” said Shawn Stillman, director and principal broker of Mortgage Outlet. “When a lender has that much volume and that long of turnaround time, they should just raise rates or not be accepting any more clients into their queue.”
Compare that to a normal turnaround time of just days, or even hours at some lenders.
“I would say most of our good lender partners get back within 24 hours, if not sooner. Most lenders have learned that 15-days [to get approved] is not acceptable,” Stillman said.
Canadian brokers and mortgage clients aren’t the only ones noticing a decline in customer service when volumes spike.
A J.D. Power report out of the U.S. found originator satisfaction scores fell from 869 in the first quarter to 853 in Q2, the same time that total origination volumes increased 54% thanks to falling rates and a mini-refinance boom.
"When there's a volume increase, whether it's purchase or refinance, it tends to negatively affect satisfaction because lenders have a hard time scaling up their staffing and process quickly to handle the influx," John Cabell, director of wealth and lending intelligence at J.D. Power, told nationalmortgagenews.com.
While the survey’s customer satisfaction scores fell in Q2, they’re still up from 2018, suggesting other factors at play.
Brokers Need to Set Expectations
While it’s up to lenders to properly manage their resources and flow of applications, Stillman says mortgage professionals can also play a role by setting borrower expectations ahead of time.
“As long as you set expectations and as long as you’re doing your job as a [mortgage advisor] to get in all the documents, it’s not really been a problem,” he told Rates.ca, adding brokers and lenders need to be upfront with potential delays.
When dealing with lenders who are known to have backlogs, Stillman tells his clients they’re not going to hear back for two weeks minimum.
“You try to manage the process as much as you can,” he said.
For homebuyers dealing directly with their lender, the J.P. Power survey found satisfaction scores were an average of 140 points higher when lenders provided their clients with access to real-time updates via an online portal. That technology is still in its infancy in Canada but it’s coming fast.
Frequent updates or not, beware that the great rates don’t always come with great service. If time is of the essence (e.g., you have to meet a financing conditions deadline), you’ll want to think twice about going for that market-beating rate. It might just cost you your house.
Sidebar: The survey also noted just 15% of mortgage consumers use their lender’s mobile app, while the majority continue to communicate via phone (63%) and email (70%).