Taking the Cross-Sell from ‘Highly Improbable’ to ‘Highly Profitable’

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When it comes to mortgage servicing rights (MSRs), the buy/sell decision has rarely been more complex than it is now. Low production volumes continue to choke originators’ profit margins; at the same time, rising interest rates and 10-year Treasury yields have made the outlook for MSRs sunnier than it has been in years.

Cash-strapped originators must evaluate the hand they’ve been dealt and decide how best to play.

Should they sell their servicing rights at improved pricing for a short-term bailout, or retain MSRs in the hopes of improving their books over a longer term?

Lenders that are on the fence about retaining servicing rights need to know about a new breed of cross-selling partnership that could stack the decks for more profitable and customer-friendly servicing.

Better Payouts Make Cross-Selling a Sure Bet

With compliance costs at an all-time high and profit margins thinner than ever, many servicers pursue a strategy of supplementing fee-based revenues with product commissions. But the cross-sell, while lucrative in theory, has been elusive in practice. One reason servicers find the cross-sell so difficult to master is that their methods, historically speaking, have been rather slapdash.

Consider the common practice of including a life insurance offer with each monthly mortgage statement. The problem with this approach is that the servicer does not know if the consumer already has life insurance – nor does the servicer know if the advertised offer will save the consumer money. In fact, the servicer does not even know if the consumer will qualify for the offer. Such indiscriminate marketing may allow servicers to cast a wide net, but it rarely brings in much of a haul.

A better approach leverages technology integrations, data aggregation and augmented intelligence to create tailored offers that make sense for select servicing customers.

For example, our firm uses data from mortgage lenders and servicers to analyze a consumer’s current policy, then reviews bids from up to 20 insurance carriers to try and find a better deal. This way, servicers can solicit consumers who they know will benefit from a new homeowner’s insurance policy. 

The consumer benefit might be monetary – we can save homeowners who switch an average of $517 on an annual policy – or it might be non-monetary. For example, we might find that one of our partner carriers can match the price of the consumer’s existing policy, but at a lower deductible. 

Whether it’s homeowner’s insurance, life insurance or any other value-add product, the key to making a targeted cross-sell program successful is partnering with a provider that leverages data analytics to segment customers and brings a wide array of products to the table.

In our firm’s case, integrating with servicing platforms gives us access to consumers’ current policy data – and partnering with many insurance carriers increases our company’s likelihood of finding a value offer for any given customer.

Redefining What a Servicer Can Be

A targeted marketing approach makes the cross-sell not only possible, but probable – and in the process, enables servicers to redefine themselves as more than the company that collects the mortgage payment. Instead, servicers become heroes who offer their customers unexpected good news in the form of savings and other great benefits.

The significance of this transformation is hard to overstate. Think about it: how often do most servicers get to tell their customers, “Your escrow payment is going down,” instead of, “Your escrow payment is going up?” Practically never.

Saving customers money benefits servicers, too, because it bodes well for payment performance, servicing revenue and customer satisfaction/retention – an area where servicers have long struggled to execute. Cross-sell partners that have a track record of success in customer satisfaction can improve a servicer’s reputation by association.

One word of advice, though. Mortgage servicers that are thinking about taking on a sophisticated cross-sell partner should vet each potential vendor carefully to ensure its technology and practices are fully compliant with all applicable regulations, including RESPA and consumer data privacy laws.

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