October 22, 2019
Customer Retention For Refinances Grows More Difficult
Refinancing mortgages has become a fairly common occurrence in the past half-decade or so, as the so-called Great Recession passed into history but left behind historically low mortgage rates. At the same time, it has become more likely that those homeowners who choose to refinance their loans will also choose to look to servicers other than those who extended them their loans in the first place. This is so much the case that, according to Black Knight’s Mortgage Monitor Report for April, the first quarter of 2019 saw the retention rate fall below 18 percent—the first time this rate has fallen below the 20 percent mark since 2005, which was right in the middle of the housing bubble that some believe led up to the housing crisis.
A big reason for this low retention rate is that competition for refinance customers has grown fierce in recent days. The refinance market has presented volatility as rate sensitivity has risen markedly, such that so many people have refinanced to cause the potential pool of homeowners who might be looking to refinance to lessen considerably. And then there was the slight increase in the 30-year rate that took place in the first quarter of 2019—which amounted to a decrease in incentive to refinance among around a million of those potential customers that remained.
Meanwhile, this lower rate of retention confronts servicers with a number of challenges. When fewer than one in five of the homeowners who choose to refinance keeps their initial mortgage lender, those initial lenders are faced with threats to their success—and even to their continued existence. It has long been the case that offering existing, qualified customers a lower refinance rate as a means to retain them has been the way to keep customers on board.
Which leads to an interesting conundrum as the Federal Reserve continues to keep rates low: it’s great for those looking to buy a home and to refinance—until the sources of competition run out. Let us hope that never happens.
At Topouzis & Associates, P.C., we perform title searches and remedy problems of title on both new purchases and refinances in Rhode Island, Massachusetts, and Florida. We back our services with title insurance for both lenders and owners. Contact us if you’re considering purchasing a new property, whether for yourself or as an investment, so we can help ensure that you achieve true ownership of your property without having to deal with unforeseen hassles arising from problems—including foreclosures—created by someone else in the past.