April 20, 2015
C.A.R. lender performance survey finds improvement in REALTORS®’ satisfaction with lenders
Higher satisfaction likely attributed to better housing market than true improvement in processes
LOS ANGELES (April 20) – A significant drop in distressed home sales and resulting smoother transactions in recent years moved the needle considerably in REALTORS®’ satisfaction level with lenders, according to findings from the latest Lender Satisfaction Survey conducted by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).
At a current index of 66, the survey’s Lender Performance Index (LPI) has increased consistently since the survey began in 2010, suggesting a continuous improvement in the lending process due primarily to an improving housing market. The index improved only negligibly between 2010 and 2011, when distressed transactions made up more than half of total home sales. During that time period, the index inched up from 31 to 33 but increased from 41 in 2012 to 56 in 2013 and at the end of 2014 stood at 66.
Overall satisfaction rating
For all transactions – which includes distressed and traditional equity sales – on a scale of 1 to 5, with 1 being "very dissatisfied" and 5 being "very satisfied," REALTORS®’ average overall satisfaction with lenders was 3.7 in 2014, up from 3.2 in 2013, 2.7 in 2012, and 1.9 in 2011. While lenders have made progress since 2011, there is still room for improvement.
Even as the lending environment has shown improvement in recent years, the Underwriting Standards Index (USI) provides evidence that there still remains difficulty in equitable access to financing for consumers. Like the LPI, the USI measures the satisfaction REALTORS® have with lenders/servicers based on their most recent home sale transaction with specific focus on underwriting in the lending process. The USI is a separate index that draws upon the answers to the question, "How did underwriting standards for the loan origination in the current or previous month compare to 12 months ago?" The underwriting standards index of 23 suggests an improvement in the lending process when compared to the prior year, when the index was at 17. Much of this improvement can be attributed to fewer reporting that underwriting standards have tightened (41% in 2014 versus 49% in 2013). Even though some steps were made forward, there still remains much room for opening up the credit box for well-qualified, responsible home buyers.
Ease of closing
One of the lending processes that has improved is ease of closing a transaction, most likely due to a shift in the market from distressed sales to non-distressed transactions over the past few years rather than a true improvement in lender performance. In 2011, nearly half (49 percent) rated the ease of closing a transaction as "extremely difficult." That figure has dropped to one in five (20 percent). Those rating closing a transaction as "extremely easy" increased from 8 percent in 2011 to 27 percent in 2014.
C.A.R. began conducting its Lender Satisfaction Survey in 2010 in an effort to gauge REALTORS®’ experience in working with lenders or servicers during their most recent transaction, most of which were short sales. The most recent survey was conducted in November and December 2014.
Lender Performance Index Methodology
The Lender Performance Index (LPI) is a diffusion index based on several survey questions from the Lender Satisfaction Survey. Each question taken from the survey essentially creates separate indices from which a weighted average is calculated. This figure results in the LPI, which ranges in value between 0 and 100. A value of 50 is considered a median value. Any index value above 75 is considered high, and any value below 25 is considered low.
The Lender Satisfaction Survey began in 2010 and was primarily focused around short sale transactions and then expanded in 2011 to encompass all transactions.
Leading the way…® in California real estate for 110 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 175,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.
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