J.D. Power: Quicken Loans and State Farm could both reap serious rewards from unique mortgage partnership

Analysts look at relationship between top insurer and top lender

State Farm and Quicken Loans shook up the housing world last week when the two companies announced a unique new partnership that will allow State Farm agents to originate mortgages for their clients using Quicken Loans’ Rocket Mortgage platform.

Through the partnership, State Farm agents will be able to offer a Rocket Mortgage loan to provide their customers with conventional Fannie Mae or Freddie Mac financing, jumbo mortgages, or loans backed by the Federal Housing Administration, Department of Veterans Affairs, or Department of Agriculture.

It’s unclear how many of State Farm’s nearly 19,000 agents are licensed loan originators (which they’d need to be to originate a mortgage, whether that’s through Quicken Loans or State Farm Bank), but the potential of the relationship with Quicken Loans is massive for all parties involved, according to new analysis of the deal from J.D. Power.

“This partnership could be huge for State Farm, which has smaller proportion of younger customers than many of their competitors,” J.D. Power wrote in a report on the deal.

“Quicken Loans, for its part, performs at the top when it comes to customer satisfaction, so adding this digital gem to the State Farm portfolio of services is compelling for insurance customers,” J.D. Power continued. “Also, Quicken Loans has a more centralized national distribution model, so this more local distribution channel could be powerful for the mortgage giant.”

According to J.D. Power, the deal offers State Farm customers the “best of both worlds” as it brings together the technology of Rocket Mortgage, which enables much of the mortgage process to be completed electronically, with the “high touch” of a State Farm agent.

“Customers increasingly prefer and rely on digital tools for servicing and transactions, but mortgage and insurance customers have struggled with these tools when it comes to more handling more complex transactions,” J.D. Power wrote. “Quicken Loans Rocket Mortgage application, paired with the in-person guidance of a State Farm agent can be an optimal outcome for customers who want the streamlines process offered by Rocket Mortgage but with access to professional guidance.”

J.D. Power also sees this relationship as a potential “boon” for first-time homebuyers, who often need some help through the buying process.

“Streamlining the digital and non-digital customer service ends is important for all customers, but can be a particular boon to younger, first-time buyers, who prefer digital but also want some handholding through the mortgage process since they have no prior experience and it’s the largest purchase they will ever make,” J.D. Power wrote. “The need for guidance among first-time buyers benefits State Farm with the opportunity to in essence ‘bundle’ a policy with that mortgage and capture a segment of customers with whom they currently have lower overall appeal.”

But the deal isn’t without its challenges, both from the consumer perspective and for the companies themselves.

“Many borrowers do not qualify for the streamlined Rocket Mortgage process, so State Farm might also have to contend with customers who require more manual mortgage origination channels, which would take more time,” J.D. Power wrote.

“Also, this move raises a question about the pricing that insurance customers will receive if they also originate a mortgage loan through State Farm,” J.D. Power continued. “How will State Farm handle customers wanting to shop for low rates on their homeowners, and would there be restrictions? Conversely, would they also receive the best pricing on rates from Quicken Loans, or would there be bundled pricing required?”

Beyond that, J.D. Power wonders about the education process that will be necessary for the State Farm agents who are not currently licensed loan originators.

But with almost 19,000 State Farm agents in the fold, there is very serious potential for this to be a huge deal. Quicken Loans may be about to bring on one of the largest mortgage sales forces in the nation, in addition to its already massive in-house team.

In the end, it will likely come down to how many State Farm agents want to pursue mortgages as an arm of their business. If the adoption of this program is high, look out.

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