In mortgage lending, we all talk about “customer for life,” but is today’s tech stack really delivering on this? We’re very close in originations, but servicing plays a critical role in this journey. So, let’s look at both to see how close we are to making “customer for life” a reality.
How Digital Originations Reset Customer Experience
The digital mortgage era began in 2012 with the first point of sale startups (and the launch of Total Expert!), then took off with Rocket Mortgage’s launch in November 2015. Now consumers expect — and mostly get — this “push button, get mortgage” experience. They can do everything on their phone plus get smart human advice immediately when needed. And they can do this whether they’re working through a retail loan officer or a direct lender.
Consumers get — and fully expect — this wonderful, modern experience during the origination process. But do they get this same experience in servicing? We’re making progress but we’re not there yet, as the stats below show.
Mortgage Refi Retention Through 3 Market Cycles
Per Black Knight, customer retention rates for servicers rose as high as the 50%+ range from 2008 to 2014, but not because of tech advances. It happened for two key reasons: (1) Many originators and servicers exited or failed during the Great Recession so there was less competition, and (2) HARP and other streamline refis were easier to retain by existing servicers.
To end 2020, mortgage servicers only retained 18% of all refinances, meaning servicers are only retaining 1 in 5 borrowers. This low customer retention has been consistent the past few years, and it was the same way from 2005-2007 before the Great Recession hit.
Then and now, one key contributor to lower customer retention is peak competition, with many more originators and servicers in the market. This time, there are two more reasons: (1) The rise of giant mortgage lead aggregators, like LendingTree and Zillow, makes it easier for borrowers to shop, and (2) digital originations makes it faster for lenders to take in shoppers.
The last phase of digital progress has made originators stronger at bringing in customers. Now, a new era of progress is starting to make servicers stronger at retaining customers.
Lender Tech Categories Today & Tomorrow
Total Expert has been analyzing the mortgage tech stack with strategy consultancy The Basis Point, and here’s their state of lender tech categories as of 2Q 2021.
I agree with the emerging Customer Experience Platform (CXP) category shown here that combines today’s CRM & Marketing Automation (CRM+) and Point of Sale (POS).
This aligns with Total Expert’s vision of using customer data correctly to power and orchestrate each customer’s entire lifetime experience.
Most Time with Customers Is in Loan Servicing
Servicing technology will play an increasingly critical role in this vision because, as The Basis Point founder Julian Hebron points out when describing the diagram below:
“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 for retention.”
One way Hebron says servicers are solving for retention is by bringing in Loan Origination, Point of Sale, CRM+, and Product & Pricing Engine functionalities into their Servicing Systems of Record.
It’s taken almost nine years for the originations tech stack to modernize, but servicing modernization will go faster, and our industry’s shared “customer for life” vision is closer than you think.
I’m exploring this and other topics in a Total Expert special podcast and blog series with The Basis Point, and I’ll return shortly to dive deeper.
Until then, here’s a link to the podcast, and please reach out to connect these topics.