How to Close the Biggest Retention Gap in Mortgage Servicing

As rising rates in 2021 slow one of the greatest refi booms ever, more banks and lenders are adding mortgage servicing to their diversification playbook. Let’s look at market dynamics driving this, how to plan in the current servicing environment, and what it takes to execute on a single customer experience from originations through servicing. But first, let’s address the customer experience gap in today’s mortgage tech stack.

Can Today’s Tech Stack Power a Single Originations & Servicing Experience?

This post is the latest in Total Expert’s 2021 Playbook special podcast and blog series with The Basis Point, and my previous post showed how most of the lifetime customer relationship is in servicing. Here’s The Basis Point Founder Julian Hebron on this relationship:

“Originators’ time with the customer is from one to 12 months, but servicers’ time with the customer is from one to three decades — IF servicers can solve the problem of only retaining 18% of refinances.”

Today’s tech stack includes separate originations and servicing systems of record, and they’re not yet linked well enough to deliver on customers’ evolving needs over years and decades.

Spoiler alert: Total Expert is becoming that link to solve the servicer retention problem. Before we get into how, let’s add market context to inform your 2021 diversification playbook.

Where the Mortgage Market Goes by 2022

In 2020, the mortgage industry funded $3.83 trillion in loans, of which 63% was refis and 37% was purchases. The MBA projects 2020 volume will drop 17% to $3.18 trillion in 2021 and will drop 40% to $2.31 trillion by 2022. Also by 2022, the market will shift to 25% refis and 75% purchases.

Below is a comparison of 2020 and 2022 volume by quarter. You all just finished a 1Q21 that looked a lot like 4Q20, but you can see where this is headed by next year. And it makes a clear case for 2021 as your transition and diversification year.

Your Mortgage Servicing Playbook

Servicing is a giant market opportunity to consider as you create your diversification playbook.

Today, there are $11.675 trillion mortgages outstanding, and while the top 50 servicers have 88.44% of the market, there’s still trillions in opportunity.

How? Because subservicers — which power your fast entry into servicing — rank very highly among the top 50 servicers, and as such, subservicers are almost one-third (30.49%) of the servicing market overall.

What it Takes to Deliver a Single Customer Experience

Subservicers enable you to enter and ramp servicing quickly, but to truly get servicing right (with or without a subservicer), you must control lifetime customer engagement and retention.

This is where Total Expert plays an increasingly critical role linking originations and servicing platforms. Below is a diagram showing how smart use of customer data can automate personalization and engagement to close gaps in the origination process. When we apply this methodology to a combined origination and servicing process, it becomes a circle of lifetime engagement and retention.

You automate engagement at just the right times during the servicing lifecycle using each customer’s financial and property data, and it creates a new transaction which retains them.

The Full Mortgage Diversification Playbook

The key takeaway here is that servicing is a viable 2021-2022 diversification play if you have the right marketing automation to solve for retention. I predict big 2021-2022 servicing modernization milestones that’ll improve retention for you and deliver a more unified origination and servicing experience for borrowers — and Total Expert will play a key role as this plays out.

Please reach out if you want to go deeper into servicing market dynamics, economics, and outlook.

And stay tuned for the next installment in this Total Expert special podcast and blog series with The Basis Point where I’ll share a different diversification playbook for 2021.

Until then, here’s a link to the podcast series, and please reach out to connect these topics.