May 10th, 2019
So a recent report from Black Knight shows that borrower retention rates are now down to record lows, and as counterintuitive as it sounds, that may actually be to your advantage. First, about the report. The company’s Mortgage Monitor report found that in Q1, only 18% of borrowers stayed with the same servicer after refinancing, with the retention rate on cash-out refis being roughly half the rate on R/Ts.
When talking about the sway interest rates have on a borrower’s decision to switch servicers, it’s historically been because they’ve been able to find much lower rates between them. Last year, however, that changed to the point where many borrowers who switched received a similar interest rate to those who retained servicers. Black Knight’s president of Data & Analytics had this to say: “This is critical, because refinances driven by a homeowner seeking to reduce their rate or term have always been servicers’ ‘bread and butter’ when it comes to customer retention. Offering lower rates to qualified existing customers is a good, and relatively simple, way to retain their business. Unfortunately, the market has shifted dramatically away from such rate/term refinances. In fact, nearly 80 percent of 2018 refinances involved the customer pulling equity out of their home — and more than two-thirds of those raised their interest rate to do so.”
So why is this good news for you? Because it not only gives you a huge opportunity to win borrowers over from their current servicers, but it also opens up the door to establish customers for life. The more you take the time to build true relationship and trust, and the more you provide unique and powerful options (esp. with cash-out refis), the better chance you will have at retaining your borrowers. Be the comparison and knock it out of the park.