Customers give banks good grades for handling the wave of mortgage refinancings early this year, according to the American Banker's annual consumer survey.

The survey found that 82% of people who refinanced mortgages in the 12 months through early May were satisfied with the service they received.

Avoiding Trouble

Though somewhat below consumers' overall satisfaction level with financial institutions, the rating is impressive in light of the staggering volume of refinancings that banks have been handling. In the past, refinancing booms produced widespread complaints of service snarls.

"It's been fairly smooth sailing," said Mark Bell, a Chicago-based financial planner who has helped more than 20 clients refinance since late last year. "Most of the people we have worked with have been quite satisfied with the turnaround and have been able to close on time."

The survey found that 50% of refinancers were completely satisfied and 32% were satisfied. Another 13% were neutral on a five-point rating scale.

Counting both refinancers and consumers who took out loans to buy homes, 42% were completely satisfied and another 33% were satisfied, the survey found.

When asking consumers about overall satisfaction with their primary financial institutions, the survey came up with higher scores. On a slightly different, four-point scale: 59% were very satisfied, 35% satisfied, 5% not satisfied, and fewer than 1% gave no answer.

But that should not diminish the service achievements racked up by mortgage lenders. These bankers have been striving to satisfy extraordinary levels of consumer demand.

Record Volume Expected

Fueled by the lowest interest rates in almost 20 years, mortgage originations are expected to hit $800 billion this year, topping last years record volume by 48%, according to the Federal National Mortgage Association.

The surge has been most evident in refinancings. In fact, refinancings were nearly as common among American Banker survey respondents as were newly originated mortgages to buy homes.

During the last refinancing boom, in 1986-87, consumer complaints about service delays were legion. Many consumers said lenders' commitments to certain rates expired before the lender was able to close the loan, meaning consumers wound up paying higher rates than they had expected.

This time around, lenders were quick to hire additional people and to put in more phone lines.

Mortgage professionals also said they were careful not to inspire overly high consumer expectations. Lenders frequently warned loan applicants from the outset to expect some delays.

In the mortgage portion of the American Banker survey, performed by the Gallup Organization Inc. in April and May, none of the 38 refinancers assigned the worst two grades on the fivepoint satisfaction scale. However, the small number of refinancers answering this question limit its statistical reliability.

Interestingly, the 57 people in the survey who took out first mortgages to buy homes were less satisfied than the refinancers. Only 42% were completely satisfied, versus 50% of the refinancers.

Homebuyers Neglected?

The disparity may be a warning signal to lenders. In serving the hordes of refinancers, lenders could be neglecting the homebuyers, their bread-and-butter customers for the long term.

Real estate agents may take note of which lenders reduced service to homebuyers during the refinancing frenzy and may direct business elsewhere.

Another possibility is that many homebuyers, unlike refinancers, are simply unfamiliar with the mortgage process and its pitfalls. "They've never seen how complicated it can get," said Paul Havemann, vice president of HSH Associates, a mortgage-market researcher in Butler, N.J.

In line with that idea, the Gallup interviewers found that 32% of people who got new mortgages or refinanced during the past year found the application confusing.

Complaints about the bulk and complexity of mortgage application forms have abounded for years.

Good Intentions Gone Awry

Mortgage executives, who also complain, say much of the paperwork is required by secondary market agencies that buy loans, as well as by state and local laws.

"While many of these requirements are founded on good intentions, the avalanche of paper designed to help borrowers only confuses them," Stephen Ashley, vice president of the Mortgage Bankers Association of America, testified in recent congressional hearings.

Of course, the application isn't a consumer's only encounter with mortgage lenders. Once a loan is approved, the consumer settles into a relationship that can last as long as 30 years.

In querying all people with mortgages - not just those who got loans in the past year - the American Banker survey found that satisfaction was correlated with age.

Satisfaction Rises with Age

While 40% of all borrowers were completely satisfied, only 33% of those 18 to 24 were, but that climbed to 47% for ages 45 through 54, and 52% for those 55 and older.

"Young people today want the world, and they want it now," concluded Mr. Havemann of HSH.

Among people who were not satisfied, the most common complaint, by 16%, was that the lender "sold my mortgage." This apparently reflects the growing practice among originators to sell not only the mortgages but also the rights to process monthly payments.

In the past, mortgage sellers generally retained those servicing rights and, as a result, borrowers often did not know their loans had been sold.

Some consumers have complained that buyers of servicing rights incorrectly record the loans as delinquent because of mix-ups during the transfer. Others have simply objected to sending their monthly mortgage payment to a company they do not know.

Among other mortgage-related complaints were unspecified poor service, high interest rates, paperwork problems, and lenders who are hard to reach.

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