Black Knight: Benefit from the cash-out refinancing boom


Over the past year, the red-hot housing market has brought many homeowners an abundance of tangible equity that has grown so fast it almost burst through the roofs of their homes. Driven by rising real estate values, triggered by low real estate inventories, usable equity – the amount available to homeowners while keeping a 20% stake in their homes – is up nearly 40% from last year.

In return, we are seeing more homeowners willing to use their existing equity reserves. Black Knights data from Q2 2021 Mortgage monitorshows the fourth straight quarter we saw over $ 1 trillion in refinance and the fifth straight quarter with at least $ 2.2 million in refinance. Specifically, this includes $ 1.1 million in cash-out refinancing, the largest such quarterly volume in nearly 15 years – a volume likely driven by both increases in usable equity and historically low interest rates.

Use the current opportunity

Black Knight August 2021 Emissions market monitor, which uses interest rate hedge data from Black Knight’s Optimal Blue PPE – the most widely used mortgage loan pricing engine – shows that this trend appears to continue into the third quarter.

In the last three months, the refinancing freezes on disbursements have risen by 41%; In fact, the increase in August pushed the total refinancing share of the market mix back above 50% for the first time since February, although fixed-interest and fixed-term lending remained largely unchanged. With so many homeowners eager to use it the increase in equity in their homesWith property values ​​skyrocketing, lenders have a unique opportunity to grow their businesses by identifying tangible equity in their portfolios and working proactively to win cash out refinancing deals.

It’s no secret, however, that recovery rates across the industry are miserable and hanging at terrifying lows. Data from Black Knight’s retention data shows that cash-out refinancing is the hardest product to hold, with only 21% of those borrowers sticking with their current lender – a troubled number that is further underscored by the current market. Recovering refinancing borrowers has long been an important, if absent, endeavor for lenders, but efforts can be neglected for many reasons.

Retention failure

Many lenders focus too much energy on acquiring new customers and not enough on winning back existing customers. This flaw comes despite the fact that data shows that it costs a lender five times as much to get a new customer as it does to keep an existing one. In addition to a lack of proactive reach, inconspicuous customer experiences, outdated technology, and ineffective communication are other culprits for poor customer loyalty.

Fortunately, there are steps lenders can take to compensate for these shortcomings and take advantage of the substantial refinancing options currently available.

Emphasize the customer experience

Lenders can start by assessing the experience they are providing to their clients throughout the entire lending process. Today’s credit and service customers expect instant access to information and digital features that enable them to get things done anytime, anywhere. Tools like mobile apps can improve the customer experience by shortening cycle times and allowing borrowers to go through the prequalification, pre-approval and refinancing processes at will. The advantages of digital tools are also taken into account in the service and help to increase transparency throughout the entire mortgage process. Customers expect self-service features that allow them to effortlessly complete tasks and access information such as:

In addition to scrutinizing the technology and digital capabilities, lenders should consider how well they are holding their brand in front of customers and maintaining relationships with them. A customer may have had a great experience taking out a mortgage this year, but what are the odds that they will think of the same lender in five years if they are ready to modernize their home? Remember that customers are constantly exposed to refinancing solicitation from competitors.

Regular communication and ongoing engagement are key to overcoming this challenge. Contact with customers after the end of business is as good as indispensable for competitive success. Think of thoughtful, relevant content that can be delivered on a large scale. Customer relationship management (CRM) platforms can help automate efforts, and some tools can even help teams create and deliver engaging content. By sharing relevant information that adds value to customers’ lives, lenders can build and maintain relationships and generate more repeat business and referrals.

Proactive contact and personalized offers

After establishing a consistent pace of meaningful communication with borrowers, lenders can take the contacting process a step further by proactively identifying customers who would be good candidates for refinancing and sending them personalized offers. Robust technology and analytics can make this possible by automating the identification and prioritization of leads from portfolio data. A sophisticated labeling function can help identify customers and loans that can benefit from refinancing based on current home equity.

Additionally, near real-time pricing technology can help lenders provide the best possible deals to customers. Borrowers who move to “greener pastures” continue to receive lower interest rates than those who stay, but the gap is not quite as wide as it was at the start of the pandemic. In fact, the average customer who lost to the market received an interest rate 8 basis points lower on average in the second quarter, far less than the borrowers who received an interest rate 15 basis points lower in the third quarter of 2020.

With such a fine line between retention and loss, offers should be as specific to the customer as possible, taking into account unique features, such as margin structures, including loan officer compensation plans. By combining this detailed, bespoke information with a robust CRM and other advanced systems, lenders can maximize delivery, impact, and dwarf competitors’ generic offerings.

In short, lenders need to be agile to benefit from changing market dynamics. By leveraging innovative technologies to improve customer experiences, building and maintaining customer relationships, and proactively delivering personalized offers, lenders can seize the current opportunity to refinance more payouts – and even their long-term recovery strategy along the way.

Disclaimer of liability

Black Knight Inc. published this content on October 20, 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unchanged, on October 20, 2021 17:41:05 UTC.

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