Is Mortgage Servicing the Key to “Customer for Life?”
As the great refi boom of 2020-21 subsides later this year, more lenders will diversify into servicing. This is a smart strategy for lifetime customer engagement so let’s look at how to plan in the current servicing market, and how to execute on a single customer experience from originations through servicing.
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?
In the first installment of our Playbook Series, with The Basis Point, we showed that most of the lifetime customer relationship is in servicing. The Basis Point Founder Julian Hebron expands 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 2022 diversification playbook.
Where the Mortgage Market Goes By 2022
In 2020, the mortgage industry funded $3.83 trillion in loans, which was 63% refis and 37% purchases. The MBA’s 2021 volume projections show volume dropping just 7% to $3.57 trillion, but in 2022, volume may drop 34% (vs. 2021) to $2.36 trillion. Also, by 2022, the market will shift to 25% refis and 75% purchases.
Below is a comparison of 2020 and 2022 volume by quarter. We’re in the midst of averaging $1 trillion in fundings for six straight quarters, but you can see where this is headed by next year. And it makes a clear case for transition and diversification before 2022.
Your Mortgage Servicing Playbook
Servicing is a giant market opportunity to consider as you create your diversification playbook.
Today, there are $11.784 trillion in mortgages outstanding per Inside Mortgage Finance, and while the top 50 servicers have 89% 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 (32.01%) 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, we show 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 continuous cycle 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.
This is how Total Expert will continue to help you power the lifetime customer journey.
The Full Mortgage Diversification Playbook
The key takeaway here is that servicing is a viable 2022 diversification play if you have the right marketing automation to solve for retention.
I predict big 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 helping you modernize.
Watch our full conversation here.