Turning Initial Borrowers into Lifetime Customers

It’s a common belief that loan originators need to get the customers while servicers need to keep them. The problem is that type of system isn’t working. Retention rates are at an all-time low, and millions of dollars are walking out the door each year. It’s time to reset and adopt strategies to improve the customer experience and provide value over a lifetime of homeownership. By doing that, lenders become long term partners, not just loan providers.

The Cost of Losing Borrowers

In Q3 of 2020, the average customer retention rate was the lowest since the period following the Great Recession, but what is that loss costing lenders? Grant Moon, Home Captain’s CEO, provided a comprehensive breakdown in a 2019 HousingWire article. Summarizing the calculation and updating for the current median home price, a servicer with a portfolio of about 500,000 loans can increase new loan origination volume by $241.7M annually- simply by retaining customers who want to buy a new home.

On the other hand, by not retaining current portfolio customers, servicers will lose hundreds of millions of dollars annually. While this cost is staggering, the solution is simple: give borrowers the experience, tools, and information they want throughout their customer lifecycle. Doing that keeps you top of mind and positioned as the go-to source for everything borrowers need.

The Retention Solution: Providing Value Throughout the Customer Lifecycle

Lenders that stay top of mind and provide value throughout the customer lifecycle retain more borrowers. To explain some simple ways lenders can do this, we need to break down the customer lifecycle and talk about touchpoints along the way.

In an informative report, PwC segments the customer lifecycle into five stages. We recommend reading the report if you haven’t already. But for simplicity, we’ve identified three main touchpoints which we will discuss now: 1) Planning, Saving, and Looking for a Lender, 2) Getting the Loan, and 3) Continuing the Relationship.

Planning, Saving, and Looking for a Lender

During this initial stage, lenders have an opportunity to close significant knowledge gaps, especially for first-time borrowers. Studies show Millennial homebuyers have a surprising lack of knowledge and comfort around mortgage products and the process of obtaining a mortgage. Since this group makes up the most significant demographic of upcoming homebuyers, becoming a trusted advisor is the key to building long-term relationships with this cohort.

By welcoming early conversations, outlining options, setting realistic expectations, and giving helpful recommendations, lenders can build trust for years to come. Tools like financial health and home affordability calculators and a branded Nationwide MLS are useful for helping potential borrowers make plans. They also keep your leads within your pipeline by eliminating the need to seek information elsewhere.

Another way to deliver value at this stage is to provide omnichannel options for communication and interaction. Now more than ever before, borrowers expect digital tools and technologies that foster open communication and trust. Ellie Mae’s 2019 Borrower Insights Survey revealed that borrowers are using, on average, more than five different methods of communication when interacting with lenders.

This means that lenders must be ready with tools like an AI bot and helpful human concierges who can help guide potential borrowers through the initial stages of planning and shopping for a lender. A great experience is often as important as getting a good interest rate, so first impressions and initial experiences are too important to chance.

Getting the Loan

During this next stage, helpful and informative omnichannel communication is just as critical. But too often, borrowers feel like they’ve fallen into an abyss after completing the application because they don’t get updates or insight into the often confusing loan origination process.

According to the management consulting firm McKinsey & Company, mortgage customers care about four things: 1) reassurance, 2) transparency, 3) simplicity, and 4) speed. If you think about those expectations, three of the four can be met with strong and proactive communication. It can be that simple. Lenders need to provide seamless communication with frequent updates and appropriate time expectations.

Of course, the process must be digitized so that borrowers may transition from a desktop or laptop to a mobile device throughout the loan process. They need the ability to work within a single portal to upload documents and access status updates. Most lenders have offered this technology and convenience for some time, and borrowers have come to expect it.

Beyond the expected, studies show that lenders who take the time to do a check-in call after the loan are far more likely to receive a higher NPS score, word of mouth referrals, and repeat business. Another way to provide value is by continuing to share helpful information and resources. Something as simple as sharing a list of trusted maintenance providers right at or after closing reinforces the trust built early on in the relationship.

Continuing the Relationship

The final stage in the customer lifecycle is all about continuing the relationship. Before a loan is transferred to servicing, lenders should update customers on the process. But a standard notice of transfer isn’t enough. Too often, inexperienced borrowers feel blindsided by the process, which severs the relationship. Instead, lenders need to educate customers just as they did in the earlier stages of the loan process. Going back to the findings of McKinsey & Company, transparency and reassurance are key.

Staying top of mind once a customer is in servicing is also critical to winning future and repeat business. Like online loan portals and AI chatbots, lenders can also use tools to automate and scale this step, making it easy to give customers what they want and need.

Lenders can empower portfolio customers to make smart financial decisions and build wealth with a home value estimate and report. Likewise, customers in the beginning stages of thinking about selling their home benefit from discounted listings and a Nationwide MLS that can be custom branded to extend the trusted experience. A buyer and seller concierge and network of contracted real estate professionals help elevate the service and resources so that portfolio customers need not look elsewhere when buying, selling, or refinancing and home.

The Takeaway

An existing relationship is one of the top reasons borrowers choose a lender, so retention is a business imperative that increases everything from referrals to revenue. By finding ways to add value throughout the customer lifecycle and providing a great end-to-end experience, lenders can turn initial borrowers into customers for life.

If you’d like to learn how Home Captain can help you turn your borrowers into customers for life, click here or reach out to us today.