The past five or so years has seen a shift in the servicing industry. Drastic changes in technology, coupled with other factors including competition from nonbank lenders, have led to an increased awareness of, and attention to, a homeowner’s broader circumstances. Servicers mainly accustomed to collecting monthly payments and stepping in when loans become delinquent are now recognizing that transcending that traditional role lets them reach homeowners in innovative ways.
Retaining customers for life is still a future-state vision, but opportunities exist to move the needle in that direction. A homeowner may select their lender, but the choice of what happens with their mortgage in the future ends at closing. Servicers are empowered with the choice, however, of what kind of ongoing experience they want to provide their customers. Expanding the business model to incorporate enhanced strategies and solutions provides opportunities to retain customers and cross-sell while improving the borrower experience. Servicing doesn’t need to be siloed.
Black Knight’s Data & Analytics division reported that only 18% of customers stay with their current servicer when seeking a refinance or home equity loan. But since the Harvard Business Review (HBR) estimates that it costs anywhere from five to 25 times more to acquire a new customer than to keep an existing one, it’s sound business sense to cultivate loyalty with those homeowners already in your portfolio.
A Holistic Approach
Yet it is impossible to cite one single ingredient for homeowner satisfaction and retention; it takes a collective, holistic approach. Competitive rates may reign, but there are other success factors, like providing a robust customer experience, offering relevant products, and adopting a company philosophy that makes borrowers feel like they are part of something good.
Sustained proactive education resonates with homeowners before they become delinquent, when they still have options and are not fraught with financial stress. Servicers who offer financial counseling, reward programs, and other creative initiatives to actively engage the homeowner can more quickly offer some of the loss mitigation waterfall options and have the potential to retain homeowners for future loans or refinances.
Digital Is Critical
This expanded approach also encompasses an investment in innovative technology. “Even though the duration of the loan may be much shorter than 30 years, new tools and data now available to servicers can help them consider establishing strategies to keep customers for the long term,” says Bill Maguire, VP, Single-Family Servicing Portfolio Management at Freddie Mac.
Technologies, including self-service capabilities via a user-friendly portal or a mobile app, are a modern expectation, as is digital paperwork with e-signatures. However, it’s important to remember that all borrowers are different, and those who are more comfortable speaking to someone about their account should have that option. Servicers should have the tools they need to meet homeowners where they are.
Data Integration Goes Hand in Hand
Meeting the demand for a digital experience involves adept data integration too. By obtaining publicly available data, leveraging in-house data, and purchasing data, servicers can create a more inclusive picture of the homeowner and loan history. This affords them to chance to deliver targeted offerings that mirror homeowners’ financial situations, goals, and lifestyle needs—whether that’s for a new credit card, no-closing cost refinance, or mortgage relief option. “The key is maintaining the servicing aspect while merging it with analytics to offer tailored solutions," Maguire points out.
One new example of how Freddie Mac is pairing of analytics with a customized homeowner experience is Resolve®, a new way of reaching resolution for mortgage relief. The tool uses automation and seamless integration to deliver rapid, rules-based workout decisions to servicers, who can then provide fast and reliable mortgage assistance to homeowners.
“Freddie Mac is committed to partnering with our clients to improve efficiency across the mortgage life cycle, with the ultimate goal of passing through value to enhance the experience of their employees and homeowners,” Maguire said.
A holistic approach to servicing is a must, and servicers need to know that they do not have to embark on this journey alone. Today, more than ever, servicers can partner with organizations that have figured it out—or at least mastered pieces of the puzzle, including customer experience, data integration, and loss mitigation—helping them provide more expanded solutions for homeowners.
Learn more about how Freddie Mac is reimagining servicing, and how solutions available today can help servicers build a new generation of servicing. Visit sf.freddiemac.com/ReimagineServicing.