Borrowers are more loyal to their servicers than ever, but Gehrke says the broker relationship is still the strongest card in the deck
While elevated mortgage rates have put a full-blown refinance wave on hold, prominent voices in the mortgage industry have been warning brokers that servicers will be ready for recapture when that wave arrives.
Tom Davis, chief sales officer of Deephaven Mortgage, warned that servicers believe that “retention is their religion.” Michael Brenning, chief operating officer of eLEND, told MPA at last fall’s AIME FUSE event that “razor-sharp, cutthroat” servicers would be coming after brokers’ former clients.
Not only are servicers better prepared to retain customers, but their perception with those customers has continued to improve. Servicer satisfaction is rising, and the relationship between borrowers and their servicers is getting longer, according to the latest servicer satisfaction study released by JD Power.
For the first time in JD Power's research, better rates are no longer the primary reason a borrower would switch, but instead the quality of customer service provided. Servicers have spent several years building the kind of relationship that makes borrowers want to stay, and the data is now reflecting that investment.
Bruce Gehrke (pictured top), senior director of wealth and lending intelligence at JD Power, said the current rate environment has given servicers time to build real relationships with borrowers.
"Mortgage servicing is a pretty low-touch relationship, and in the current interest rate environment it's a longer and longer relationship than it has been," Gehrke told Mortgage Professional America. "You're with your servicer now longer than you were five or six years ago when people were refinancing more aggressively. So people were refinancing multiple times during that time period because it made sense to — now you don't have that option."
Wholesale versus retail
In this year's rankings, Chase led with an overall satisfaction score of 694, followed by Rocket Mortgage at 690, Bank of America at 672, and Huntington National Bank at 654. United Wholesale Mortgage, which is continuing to build out its in-house servicing, scored 608, one point above the study average.
Gehrke said servicers have used the extended relationship window to build trust with borrowers. He said satisfaction tends to peak in the three- to five-year range, after the initial adjustment period but before the relationship becomes routine, and that the best servicers are focused on staying relevant through that entire arc.
Continuity and stability are what drive trust, according to Gehrke, which is why servicing transfers consistently hurt satisfaction scores.
"Trust is difficult to build, and it takes time, and it's really easy to damage," he said. "One stumble here or there can really hurt you. The biggest challenge, especially with homeowners, is continuity and stability, which help drive trust."
Gehrke said the challenge for wholesale lenders whose borrowers come through the broker channel is significant, specifically because the borrower relationship has already been built by someone else. When a borrower closes a loan through a broker and their servicing transfers to a name they do not recognize, the relationship starts at a disadvantage.
"That broker relationship tends to be very close and very personal,” Gehrke said. “That's the advantage they bring to the marketplace. Then it goes to a large wholesale company that closes your loan. They're servicing a loan that they didn't originate in a retail environment. That makes it more difficult. That initial transfer — how much do borrowers pay attention to that? They don't really think about it until they're in it."
Customer service is key
When borrowers were asked what would make them switch servicers, bad customer service ranked first, ahead of better rates and financial terms for the first time.
"Prior to this, it was always better rates would get people to move," he said. "This year rates and financial terms were second, significantly, 10% lower than bad customer service."
He said the top reasons borrowers listed for staying with their current servicer were better self-service options, better customer service, and simpler payment methodology, meaning the experience rather than the economics.
Gehrke said servicers are aware that a refi wave is eventually coming and that many borrowers already indicate strong intent to reuse their servicer for the next loan.
"I think the best that servicers can hope for is that first crack at that borrower," he said. "Especially when we have younger and younger borrowers coming into the portfolios, their tendency to shop around is significantly higher. So the question is, how strong is your relationship? Will it survive the competitive challenge? And I think the early answer looks like it should."
When rates eventually fall, and refis start filling pipelines once again, Gehrke said it will be more than just rates that will decide who wins the recapture.
"What you want to do is control those other elements that are within your control," he said. "Pricing isn’t always in your control, but you have to stay competitive. We see pricing as retaining this importance that it’s always had, but less of a competitive differentiator as the pricing kind of levels out."
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