Many Americans would get mortgages from Wal-Mart, PayPal
U.S. borrowers focus on price, customer service and trust in their provider when selecting a mortgage
A survey has found that many Americans - as high as 33 percent, or one in three, would welcome purchasing a mortgage from retail giant Wal-Mart. If that sounds disconcerting, considering the statistic that these same Americans would be amenable to buying a mortgage form Internet payment provider PayPal. This comes as startling news to banks and lenders as PayPal and Wal-Mart don't offer this service.
Two-thirds of respondents in a recent poll said the high cost of getting a loan was the most painful aspect of the mortgage application process, followed by slow execution (56 percent) and poor communication with the lender (32 percent).
"There is a real threat from new entrants," Doug Hautop, lending practice lead at the group says.
The study's results were based on online responses from 618 U.S. consumers in September.
Quicken Loans and Nationstar Mortgage Holdings Inc., both non-bank mortgage companies have been gaining market share as some large banks such as Bank of America Corp. that burned them during the financial crisis.
Carlisle & Gallagher, based in Charlotte, North Carolina, provides consulting services to five of the top eight U.S. mortgage originators, Hautop said.
What was the reaction from Wal-Mart about these recent findings? A Wal-Mart Stores Inc spokeswoman declined to comment on the survey. The retailer provides small business loans at its Sam's Club stores, but doesn't offer mortgages.
PayPal Inc., a subsidiary of online auction site eBay Inc., says it offers credit lines for customer purchases, but hasn't announced any plans to move into the mortgage business.
Retailers have entered the mortgage business before. In late 2011, warehouse retailer Costco Wholesale Corp began offering home loans online through select lenders. The company doesn't disclose loan volume, but the service has gone well, said Jay Smith, Costco's director of financial services.
"We have tried to make it a service where members see significant value on rates and fees," Smith said.
There was a bright spot for traditional banks. While the Carlisle & Gallagher survey found that 80 percent of U.S. consumers would consider a mortgage from a non-bank, 70 percent of respondents said they would prefer to have their mortgage with one of their main banks -- although only 39 percent currently do so.
Two-thirds of respondents said the high cost of getting a loan was the most painful aspect of the mortgage application process, followed by slow execution (56 percent) and poor communication with the lender (32 percent).
"Banks have a captive audience, and have folks who are willing and wanting to do business with them," Hautop said. "It means it's time to go back to the basics for our banks."
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