It’s hard work to convert leads into paying clients. It would be a waste to subsequently watch competitors realize the full lifetime value of your borrowers.
But therein lies an opportunity for mortgage originators. Through strategic partnerships, originators are better able than ever before to identify, remarket and recapture past clients.
Borrower-recapture rates have hit a 10-year low. Lenders — and the mortgage originators who work with them — are failing to cash in on potential future business from the bulk of their existing clients, according to research from Black Knight, a leading provider of integrated software, data and analytics solutions across the homeownership life cycle.
Assume a client buys five homes in his or her lifetime. The current median home purchase price is $250,000, and homeowners remain in their homes on average for nine years, according to National Association of Realtors.
The average value of a customer to a lender in that scenario would be in excess of $490,000, assuming they keep that client in their portfolio through a lifetime of home purchases. That also assumes the current market interest rate of 4.75 percent and a modest home- purchase price increase of 5 percent for each relocation.
With the current rampant portfolio-runoff issue plaguing mortgage lenders, however, the originating financial institution stands to lose out on at least $400,000 of that future interest income — or 82 percent of the total value of that customer.
To compete against other originators, and improve recapture rates, it has become necessary to take the steps needed to better understand the borrower’s behaviors and their needs. In order to improve the revenue realized from the lifetime value of clients, it’s vitally important for mortgage originators to be front and center throughout the process of selling and subsequently purchasing a home.
Mass mailers, marketing e-mails and informational news-letters have diminishing rates of returns, because of their generic nature and the sheer quantity of materials a potential borrower may receive. Instead, originators should form strategic partnerships with companies who specialize in the identification of these clients, remarketing to the borrowers and the oversight of home-selling and buying transactions.
These can include data-as-a-service organizations. These companies provide predictive analytics to monitor an entire customer population for behavioral events that indicate which of your clients may be considering selling their current home or purchasing a new home.
Organizations that specialize in the homebuyer shopping journey are able to provide in-market indicators that alert originators months ahead of credit triggers and real estate listing alerts — some providing this information 3 ½ months in advance. This early indication provides originators ample time to methodically engage with them.
These potential repeat borrowers can then be marketed to with more timely and relevant messages for greatly improved performance and customer experience. Without this data, an originator typically won’t even know that a client is selling their existing home until the home is listed on the market. That greatly reduces the likelihood of capturing the borrower’s financing for their next home purchase.
Reports indicate 73 percent of all borrowers (and 81 percent of millennials) that are doing a simultaneous home sale and home purchase are doing so in the same geographical area. Therefore, it can be concluded that often the listing agent of the client’s home will also be the buyers’ agent for their subsequent home purchase.
Real estate agents are highly fragmented contractors and independent proprietors. Their business is predicated on the effectiveness of their localized relationships with other constituents within the homebuying ecosystem.
Because of this, real estate agents often have tenured relationships with local lenders. This puts centralized mortgage originators at a competitive disadvantage based on the “influencing power” of the local agent. By having a dynamic-scoring system in place that reinforces the effective distribution of potential borrowers to the best-scored agents, originators stand to mitigate the trend of decreasing rates of repeat clients.
Furthermore, providing referral partners with the ability to have an embedded service to list their customer’s homes presents the conditions needed to recapture the 47 percent of clients who sell their homes and do a simultaneous purchase.
When originators work with a company that has a full-service real estate platform, they’re able to provide their home sellers/purchasers with advice that aids in shepherding the client through the home-selling and purchase processes while ensuring a positive customer experience. This platform also acts as an advocate for the originator by providing transparency and works to deliver a real estate agent (or multiple real estate agents, if the client is relocated to another market) who also will reinforce the value of their current lender relationship.
It is extremely important that this platform is integrated directly into the originator’s native process flows. It’s paramount to have a platform that enables transparency, merit-based distribution of leads and human touch for the nuances associated with the real estate transaction.
Utilizing the in-market signals to identify potential repeat borrowers much earlier in the shopping journey and remarketing to them will result in higher recapture rates for originators whose clients are both selling and purchasing a home simultaneously. Using such a system can lead to nearly half of the customers who have decided to sell a home and do a simultaneous purchase to do so via their existing lender relationship, some research shows.
The success of this approach is credited to the ability to understand borrower behavior prior to traditional triggers and giving the borrower a path to their goal, which is often to sell and buy a home. This strategic-partnership model provides potential repeat business through at least four touch points with a client prior to the typical in-market notification trigger. Using this model, the client is:
Identified and provided with a marketing offering for their lender.
Contacted personally by a concierge to determine their needs and timeline.
Matched to a trusted score-carded real estate agent.
Pre-qualified prior to other lenders being notified of their interest in the market.
This comprehensive approach to identification, remarketing and recapture is the key to curbing the trend of decreasing revenue per client that originators are now facing. This provides borrowers with the resources needed to navigate these complex transactions.
It also streamlines the marketing and communication process to just those clients that are in-market. That reduces the communication burden for originators and the marketing fatigue for clients in general.
This, in turn, increases the value of the leads generated and results in substantially higher revenue figures since the single transaction lead is more likely to turn into a repeat client. Strategic partnerships provide the opportunities and the resources that originators will need to make that goal a reality.