Time-to-close has been linked to borrower satisfaction, but should it be? It makes more sense to promise on-time closings.
We know that a top priority for mortgage borrowers is closing the loan quickly. Survey after survey has shown us that speed is a priority for home buyers. But how fast is fast enough?
The average time-to-close a loan, across all product types, is 47 days, according to studies. Of course, we’re averaging in refinances, which typically take longer because they are often scheduled behind purchases, and home equity loans, which are often even lower priorities for smaller lenders, relatively speaking.
Most real estate agents will tell home buyers to expect it to take about 30 days to close on a new house. A lot of that gets blamed on the lender, especially when the appraisal and underwriting process takes longer than the agent has suggested it should. But there is also purchaser due diligence and home inspections to consider. All of that takes time.
So, why do we keep hearing about new technologies that promise -- some actually guarantee -- to allow lenders to close loans in less than 30 days?
Some loan products would benefit from a faster close, especially when a new home isn’t involved. Many good loan origination technologies can do this, moving as quickly as the consumer to move the loan through processing to the close.
But suggesting that a new home loan should be closed as quickly as possible introduces unnecessary risk into the process, for everyone engaged in the transaction. Automation can move loans through our process very efficiently, but quality control still takes time and human underwriters and appraisers are important parts of the lender’s risk mitigation process. Speed can lead to errors and that increases risk.
It’s not just technology vendors who are taking speed to an extreme. We’re seeing more lenders making a big deal out of how quickly they can complete the financing process. But completing our process before the real estate agent can complete the work involved in finalizing the sale will not provide any benefits to the consumer.
If you ask any home buyer how many days it should take to close their loan, they won’t have a number, unless the real estate agent has already given them one. But if you ask them if their lender will have the financing lined up by the closing date the agent has given them, they will say, “they’d better!”
Consumers don’t necessarily want a faster time-to-close. They want on-time closings. They want the deal to be finalized when their real estate agent tells them it will, whatever day that falls upon.
That means that one key to customer satisfaction is to have better communication between the lender and their business referral partners in the real estate sales business. When those parties work together to set the consumer’s expectations correctly, satisfaction increases on both sides of the transaction.
By Joe Camerieri, EVP, Client Account Management at Mortgage Cadence
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