What Can Lenders Do to Retain More of Their Servicing Portfolio?

When a borrower completes the mortgage loan process, there is a strong chance that they will have positive feelings about it.

Whether it’s relief that the financial stress is behind them or the excitement of getting the keys to a new house, borrowers are generally happy post-closing. Most give their lenders and originators high marks on surveys and express a high likelihood to use the lender again. With all of that positive sentiment, you might expect them to quickly return to their originating lender when their next need arises. In reality, less than one in five borrowers do (see the chart from Black Knight’s January 2021 Mortgage Monitor below). Our question this month: What can lenders do to retain more of their servicing portfolio over the long term?


Servicing retention rates across the mortgage industry were just 18 percent last year  — only 11 percent for cash-out refinances. As recently as 2011, that number was closer to 50 percent. While some of this drop can be accounted for by aggressive sales strategies of fast-growing Independent Mortgage Bankers (IMBs) like Rocket, New Rez, and Freedom Mortgage, low retention rates are not a new phenomenon by any stretch.


Looking back over the past decade (see chart below), lenders appear to have an easier time retaining loans within the first two years, then struggle more and more the older the loan is. Retention rates drop from 24 percent in the first two years to just 15 percent by year fiveThis sizable drop-off indicates that once two to three years have passed, the lender and loan officer are largely out-of-sight, out-of-mind.


Servicers would be wise to create on-going communication with borrowers to nurture the relationship forged during the initial origination process. For those lenders who purchase Mortgage Servicing Rights (MSR), it’s equally important to create dialogue with the borrower during the on-boarding phase and continually throughout the new relationship.


You never know when you’ll need to leverage these relationships. For instance, think about the 2.3 million borrowers who are still in forbearance and may be coming out of it soon. The lag in payments under forbearance wasn’t just the principle, but the escrows, too. These people, many of whom are still struggling to get by, will soon be told that their payments need to increase to cover the difference. At the same time, most of these same borrowers’ equity just got a big boost over the past 12 months, making them ripe for refinance. These are complex, delicate conversations best initiated by a trusted advisor, not a faceless institution. The key is creating a “felt” connection by the borrower with your servicing team.

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