Davis says brokers without a full non-agency product suite are the most exposed as bigger players buy up servicing rights
Elevated mortgage rates have put the topic of a refinance wave on the back burner for now. While most believe it will still happen eventually, a higher-for-longer rate environment has pushed pause.
Industry veterans are still encouraging brokers to keep one eye down the road for a future rate drop large enough to bring about the next wave of refis. Recent events in the mortgage industry could make the battle for those eventual refinances more challenging.
Larger mortgage companies are acquiring servicing portfolios because owning the servicing relationship means owning the data, owning the communication channel, and being at the front of the line when a borrower decides they need a new loan.
One mortgage executive has been reminding brokers who are not staying in front of their past clients with a reason to call that the consolidation wave is accelerating a retention problem that was already serious.
Tom Davis (pictured top), chief sales officer at Deephaven Mortgage, said the servicer dynamic is something he hears about constantly from originators across the country.
"That's exactly what you're seeing," Davis told Mortgage Professional America. "People are buying servicing so they could start soliciting those clients."
Keeping in touch with past clients
Davis said a majority of former loan customers move on to another originator when they go to do their next loan. Now servicers are lining up for those customers as well.
That’s one of the reasons why Davis has been encouraging brokers to use equity products to serve the needs of past clients who cannot refinance but could tap into their equity. Plus, it keeps the broker top-of-mind for that eventual purchase or refi.
"The average loan officer in the United States, 65% of the time that borrower, when they go do another loan, they're going somewhere else," he said. "And so I think originators need to embrace these products so they can retain their past clients."
By being able to help these customers now with equity products, the broker now moves back to the front of the line for these past clients, Davis said.
"If I had a restaurant and 65% of my customers that came to my restaurant the second time didn't come back to my store, they went to another restaurant down the street, the servicer who I sold the loan to," he said. "The goal should be: how do I keep them coming back to my store and how do I have them become a customer for life."
When a loan is sold, Davis said, the servicer immediately begins soliciting the borrower, while the broker who originated the loan is often completely absent from that conversation.
"When that loan gets sold, the servicer immediately starts to solicit them," he said. "They have all the data, they have AI, and they are aggressively marketing to them. And those borrowers, if the loan officer doesn't stay engaged, they're going somewhere else."
Embracing non-agency products
The originators who are retaining clients, Davis said, are the ones who have given themselves a reason to call beyond rate. A broker who only offers agency products has very little to say to a past client locked into a sub-5% first mortgage.
"If originators don't embrace equity or non-QM or some of the investor products in the marketplace — an RTL, fix and flip, ground up construction — then those borrowers are going somewhere else," he said. "And in order to do that you need a full suite of non-agency, including equity and all the products."
The investor segment gives brokers another opportunity at repeat business, Davis said. Unlike a primary residence borrower who might do a deal every five to six years, the average real estate investor does five to seven transactions annually.
"If you do a DSCR second for an investor, you get paid on one deal, then they start the fix and flip — that's the second deal," he said. "Then you do the takeout for the DSCR loan. That's three commission checks on one transaction."
Davis said those who continue to wait for a big drop in rates to bring a surge in refis may be waiting a while.
"I would not count on rates getting lower," he said. "The market has shifted, and originators need to embrace and adopt the shift and recognize it. Because if not, they're being left behind. If you don't have all these products, you're at a competitive disadvantage.”
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