What changes has the New Year brought into your life? If you have strong self-discipline, maybe you’ve hit the gym consistently or finally stuck to that budget.
However, if you’ve been striving to improve retention in your servicing portfolio, the New Year hasn’t necessarily been your friend.
The mortgage industry is dealing with the competing forces of rising interest rates and stratospheric levels of home equity. As the industry moves from a rate-centric refinance market to an equity-centric one, attrition risk is on the rise given far less successful retention of those customers. While cash-out refinance borrower retention has been improving, it still pales in comparison to that of rate/term refinances.
Additionally, we’ve seen the population of high-quality refinance candidates plummet since the champagne toasts on New Year’s Eve. The 11 million refinance candidates at year-end had fallen below 3.8 million by the end of February. Lenders now find themselves competing for fewer candidates.
Finally, even though servicers hit an eight-year high in terms of retention activity in the fourth quarter of 2021, servicers are still losing a whopping two-thirds of borrowers from portfolios when they refinance. It’s time to adopt a higher benchmark for success – especially when considering how valuable retention is given current market conditions.
Retaining borrowers is significantly more cost-effective than sourcing new leads, and this fact is underscored in an environment where there are so few rate-driven refinance fish in the sea. As rates keep climbing, a servicing rally that boosts MSR valuations may be on the horizon, and higher retention often equates to higher effective value.
As servicers swim through circumstances that make retention feel hopelessly out of reach, what are they left to do? Black Knight hears so many say they’re focused on earning customers for life – but what separates those who walk the walk from those who merely talk the talk?
The successful few know that it takes a robust, digital ecosystem to maximize engagement and offer differentiating experiences. Remember – your customers are thinking about their home, not just the loan behind it. Many servicers have searched for a way to make the management of that loan as effortless as possible for their customers, while adding additional value throughout their mortgage journey. In the U.S., homeownership is synonymous with the American Dream – and servicers have the special privilege of being actively involved in borrowers holding onto that dream.
As such, a premier servicer’s role extends far beyond collecting payments. A premier servicing experience is characterized by much more than a digital self-service app. At its core, customer-focused servicing must be comprised of innovative technology and integrations that are seamlessly interwoven with APIs. These connections enable servicers to offer more capabilities to consumers without requiring them to navigate outside of their digital footprint to visit external applications or websites.
Beyond self-service functionality, digital connections can enable omni-channel, personalized communications about topics that are important to your consumers. Think beyond traditional advertising messages to customized marketing that adds value to your customers, such as personalized refinance offers based on their unique characteristics and the current market.
Integrations can help your customers perform necessary tasks, such as managing the maintenance of their home, directly within your platform. For example, Black Knight’s Servicing DigitalSM solution integrates with Househappy – a home concierge suite – to help consumers track home information, organize repairs and perform scheduled maintenance without ever leaving the app.
Similarly, Servicing Digital integrates with the insurance marketplace so customers can quickly and easily determine whether they’re eligible for a lower monthly payment by changing insurance providers – no logging in to a third-party site to request a quote.
These examples barely scratch the surface of possibilities that a digital ecosystem creates to support retention. Delivering a connected servicing experience is within reach thanks to today’s innovative technology. And given the current lending environment and struggling state of retention, the timing has never been more critical for servicers to buckle down and do more to serve their customers.
Give them integrated servicing experiences with effortless access to resources they need and want to manage their most prized asset. Then, you’ll already be on their mind when the time comes to refinance or get a new loan.
Learn more about delivering a connected servicing experience with Black Knight’s Servicing Digital solution – a tool designed for retention and continuous customer engagement.