Borrower retention has been a widespread issue for mortgage lenders for many years. The average borrower retention rate in the mortgage industry is just 18%[i]—the lowest rate of any major industry in the United States.
In the current mortgage market, borrower retention is more critical than ever before. That’s because mortgage applications are waning, purchase rates are low, and interest rates continue to rise. As a result, most lenders simply don’t have as many new customers coming through the door. In this tough market, it’s important for mortgage lenders to employ affordable borrower retention solutions that can generate more business.
So why do mortgage lenders face such low customer retention? And what can they do to fix this issue? Below, we’ll discuss the unique challenges that mortgage lenders face when it comes to borrower retention. We’ll also outline four effective tactics to overcome these challenges.
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Borrower Retention By the Numbers
Borrower retention measures how many customers return to their original mortgage lenders for repeat business. Here are some statistics that showcase the dismal state of borrower retention in the mortgage industry:
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- Only one in five borrowers returns to their original lender for additional loans.[ii]
- Seven out of ten borrowers forget about their mortgage lender within 13 months.[iii]
- Borrower retention rates have dropped from 23% in 2019 to 18%.[iv]
- For reference, the average customer retention rate across all industries is 75.5%.[v]
After reviewing these statistics, many mortgage lenders may be wondering why borrower retention is so low and what they can do about it.
Why is Borrower Retention So Low in the Mortgage Industry?
Here are a few reasons why borrower retention rates in the mortgage industry are so poor:
People don’t seek out mortgages that often
In many industries, it’s not uncommon for customers to return to a business daily, weekly, or monthly. For example, coffee drinkers may visit their preferred coffee shop every morning. Since customers within other industries seek out their products or services more frequently, their customer retention rates tend to be higher.
In contrast, new mortgages aren’t obtained very often. The average lifespan of a mortgage loan is three to five years, meaning that most people only search for mortgage lenders a couple of times each decade, if that.
Since so much time can pass between one transaction and the next, many borrowers may forget about their previous mortgage lenders by the time they’re in the market again, even if they had a great experience with them in the past.
Many lenders don’t reach out at the right times
Unfortunately, some mortgage industry borrower retention problems are the result of inadequate customer service. On average, it takes mortgage lenders 48 hours to respond to a customer inquiry. Within that time, it’s easy to lose a lead to a fast-acting competitor. What’s more, mortgage lenders often fail to reach out to their past customers at the time that it matters most: When they’re actively in the market for a new loan.
Lenders may lose track of valuable leads
Many loan officers don’t have any strategies in place to help them attract returning customers. Even the loan officers that do, may not use tools that are properly integrated with one another. Without cohesive solutions, it’s easy for leads to fall through the cracks.
Homebuyers often rely on their realtors to find lenders – Home buyers often hire real estate agents before they ever begin searching for a loan. These home buyers may ask their realtors for mortgage lender recommendations, rather than returning to their old lenders or searching for new ones on their own. If you don’t have strong relationships with the real estate agents in your area, they may funnel your customers’ business to competitors.
As you can see, several factors play a role in the deficient borrower retention rates seen across the mortgage industry.
The Impact of Low Borrower Retention
Now that we’ve explored why customer retention is so low in the mortgage industry, let’s take a look at how it impacts mortgage lenders and their businesses.
Low borrower retention can increase mortgage lenders’ customer acquisition costs considerably. Acquiring new customers is almost always more expensive than winning back old ones. In fact, it may cost as much as five to 25 times more.[vii] The reason? New customers require more marketing and advertising to win over.
You may think that buying leads can solve this problem, but that’s not necessarily the case. While every lender’s cost of borrower acquisition is different, it’s estimated that lenders pay an average of $350 to $750 for every purchase lead.[viii]
So, as you can see, putting up with poor borrower retention can tank your profits and hinder your business growth.
4 Ways to Boost Your Borrower Retention Rate
While borrower retention is low for a large portion of mortgage lenders, some have found ways to beat the odds. For example, Quicken Loans’ parent company boasts a borrower retention rate of 63%.[ix]
If you want to get your numbers up, here are four strategies you can employ:
#1 Reach Out Regularly
Since mortgages are only sought every few years, it’s important to maintain an ongoing relationship with your past customers. You can stay in touch by reaching out on birthdays, holidays, and home purchase anniversaries. These simple gestures may be enough to keep your company’s name fresh on borrowers’ minds, increasing the chances that they think of you the next time they need a loan.
You can also send out a monthly or quarterly newsletter where you break down the evolving housing market, worthwhile loan products, and more. For instance, you may want to promote HELOCs, which are quickly eclipsing cash-out refinances in this current purchase market.
By positioning yourself as an industry expert, your past customers may be more inclined to choose you for their future lending needs. They may also be more likely to pass on your name when their friends or family members request mortgage lender referrals.
#2 Build Relationships With Local Real Estate Agents
Next, you can tackle the issue of real estate referrals by networking with local realtors on a regular basis. You can do so by:
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- Attending local real estate conferences
- Reaching out to reputable realtors in your area
- Interacting with other local real estate professionals on LinkedIn
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By nurturing these professional relationships, you may discover that you get referred to your past customers by their realtors more often.
Here at Certified Credit, we’ve also found that hosting educational seminars for real estate agents and other mortgage professionals to be very valuable for our lending partners. When we support these seminars, our team offers their credit expertise to not only help various real estate professionals share knowledge and get on the same page, but they also help facilitate relationship-building opportunities.
#3 Connect With Customers While They’re Actively in the Market
One of the most effective ways to move the needle on your borrower retention rate is to reach out to past customers at the most critical time—when they’re actively searching for a new mortgage.
So, how will you know when this is happening? You simply need to use an automated borrower retention tool, like Cascade Alerts. Cascade Alerts is an affordable credit monitoring tool that can notify you as soon as your past and current clients are in the market.
Here’s how Cascade Alerts works:
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- Cascade Alerts syncs up with your customer database – Cascade Alerts can be integrated with your customer relationship management (CRM) software. You can also upload your customer database into Cascade Alerts using a secure link.
- Cascade Alerts will monitor your borrowers’ credit activity – Once you’ve connected your database of borrowers with Cascade Alerts, it will monitor their credit reports for mortgage-related credit inquiries. Thanks to this continuous monitoring, you can be alerted of any relevant credit activity within 24 hours.
- Cascade Alerts will send you lists of qualified leads – Cascade Alerts allows you to customize your credit thresholds so you only receive alerts for leads that meet your current criteria. In turn, you can sit back and relax as you receive daily, weekly, or monthly reports with qualified leads, along with their phone numbers and pertinent borrower details via text/SMS or email.
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Once you receive a new lead list, all you have to do is reach out to your past customers. Since you know they’re shopping for a new mortgage, you can highlight why you’re the best lender to work with at this time. Don’t worry, there’s no firm offer of credit required.
If you’ve provided excellent customer service and you make a compelling pitch, there’s a good chance you’ll earn their repeat business and boost your borrower retention. Best of all, Cascade Alerts only cost a couple of cents per borrower to monitor or a few dollars per lead you receive – making it less expensive than many other retention and lead generation solutions.
#4 Make Sure Every Lead is Accounted For
As we mentioned before, it’s easy for certain leads to get lost in the shuffle. Fortunately, Cascade Alerts solves this problem too. In addition to employing seamless integration, Cascade Alerts lets you distribute leads across your company strategically.
For instance, if one loan officer is out of the office on vacation, their leads can be rerouted to another loan officer or the head of the office. Branch managers can also review summaries of the leads lists and their statuses, making it easy to ensure every lead is followed up with promptly.
As you account for every worthwhile lead that comes your way, you can safeguard your borrower retention campaign against any single loan officer’s scheduling limitations.Partner With Certified Credit to Enhance Your Borrower Retention Today
Partner With Certified Credit to Enhance Your Borrower Retention Today
After investing so much time and money into acquiring new customers, you can maximize your return on investment by utilizing an automated borrower retention tool, like Cascade Alerts.
Here at Certified Credit, we provide access to Cascade Alerts, as well as many other mortgage lending solutions. Our offerings include:
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- Affordable credit reports
- Credit score improvement tools
- Automated lead generation tools
- Automated prequalification
- Automated verification of income and employment
- Automated undisclosed debt monitoring
- Property and valuation tools
- Fraud and risk support
- Underwriting compliance support
- Settlement services
If you want to discover how Certified Credit can help you achieve a better borrower retention rate and boost your business growth, schedule a demo with our team today.
Sources:
[i] MPA. Cracking the code – fintech firm’s secret revealed.
[ii] MPA. Cracking the code – fintech firm’s secret revealed.
[iii] Homebot. 4 Reasons Clients Forget Their Loan Officers (and how to fix it).
https://homebot.ai/blog/4-reasons-clients-forget-their-loan-officers-and-how-to-get-their-attention
[iv] National Mortgage News. Retaining existing mortgage customers remains a struggle: Black Knight.
[v] Statista. Customer retention rate of businesses worldwide in 2018, by industry.
https://www.statista.com/statistics/1041645/customer-retention-rates-by-industry-worldwide/
[vi] Rocket Mortgage. The Average Mortgage Length In The U.S..
https://www.rocketmortgage.com/learn/average-mortgage-length
[vii] Harvard Business Review. The Value of Keeping the Right Customers.
https://hbr.org/2014/10/the-value-of-keeping-the-right-customers
[viii] MPA. Cracking the code – fintech firm’s secret revealed.
[ix] Inside Mortgage Finance. Quicken’s Big Marketing Spend Boosts Return.
