Mortgage Servicers Seeing Higher Retention Rates Among Refinancing Borrowers


Mortgage servicers generally tend to see higher churn rates when mortgage rates drop and refinancing volume increases, but the impact was less so in the second quarter, Black Knight’s Mortgage Monitor report shows.

A surge of rate/term refinances helped improve retention rates for mortgage servicers during the quarter, the report shows.

Servicers managed to retain 24% of all refinancing borrowers during the quarter – the highest such retention rate since late 2017, according to the report.

Among rate/term borrowers the retention rate was even higher at 30%.

Although losing two out of every three rate-driven refinance customers doesn’t exactly sound positive, Black Knight points out that it is significantly better than the sub-20% retention rates seen throughout much of 2018.

“As we’ve reported in the past, retention rates tend to be higher for rate/term refinances than any other type of transaction, and that’s just what we observed as of the end of [the second quarter],” says Ben Graboske, president of Black Knight’s data and analytics division, in a statement.

Borrowers who refinanced out of 2018 vintage loans were the easiest to retain, Black Knight’s data shows, with some 35% sticking with their original lender.

“Given that 17 percent of the 11.7 million current refinance candidates are in 2018 vintage loans, retaining their business should be a top priority given today’s market make-up,” says Graboske.

Still, 62% of all refinances in the second quarter were cash-out refinances, which tend to have lower retention rates. 

“The not-so-good news is that – in an environment of record-high levels of tappable equity and low interest rates that makes cash-out refinances an affordable option for accessing that equity – servicers are retaining just one in five cash-out borrowers,” Graboske says.

“Savvy lenders and servicers need to go beyond the low-hanging fruit of 2018 vintage loans in order to retain this business – and capture additional market share where others are missing out,” Graboske says. “The key to success is being able to identify and target these customers through an informed, data-driven growth and retention strategy.”

Notify of
Inline Feedbacks
View all comments