Shark Proof Your Business for the Next Refi Wave

I had a near-death experience once that I’ll never forget. Of all the places one could end up after college, I somehow found myself in Myrtle Beach, SC. I was living a half-block from the beach and decided to take up surfing, or probably more accurately, I was attempting to surf. The East Coast not being known for its big waves, one of the better strategies was to wait for stormy weather, which made for bigger swells. One particularly stormy day, I was out on the water and saw my friends frantically paddling toward shore and waving their arms. At that moment, I looked down between my legs and saw the largest shark I’d ever seen…with his mouth open!

That was my last surfing outing for a while, but recalling that story got me thinking about the huge risk many lenders are taking waiting for the “next big refinance wave” that may or may not come (see Garth Graham’s InFocus article from June), and the sharks lurking in the waters that jeopardize success even when the market turns in our favor. Our question this month: “How can we shark-proof our business and make sure we catch the next refinance wave?”

How Can We Shark Proof Our Business and Make Sure We Catch the Next Refi Wave?

One thing I learned after my shark encounter is that storms often drive fish to unfamiliar territory like shallower waters, which makes for fertile hunting grounds for hungry sharks. In the same way, the stormy weather we’ve seen in the past couple of years in the mortgage industry (high rates, low housing inventory, golden handcuffs, etc.) has pushed many lenders into the unfamiliar territory of selling off their servicing to hungry correspondent lenders, who are willing to gobble up as much as they can get and are often willing to pay a premium. Why? Because they have expert teams that will aggressively pursue those borrowers once the rates finally turn.

The mortgage industry has always been cyclical, but you hear a lot of people these days saying that “this one is different.” And they’re right. Consider the fact that over the past 43 years, the trend of interest rates followed one long, consistent downward slope, from a high of 18.63% in 1981 to a low of 2.73% in 2021. In short, previous cycles always had “plenty of fish in the water” even when rates crept up for a short time because there were always people who hadn’t touched their mortgages in 10 or 20 or more years.

Source: https://www.freddiemac.com/pmms

The “higher for longer” rates we keep hearing about simply have not been high enough for long enough, which means that as refinances resurface, volume will more than likely creep up as opposed to bounce up. Meanwhile, loan officers will continue to battle it out to win each deal (often going up against savvy correspondent teams), which means getting the customer experience perfect the first time around has never been more important.

Diagnosis

So how does a lender shark-proof their business? Two words: Increase loyalty.

Many lenders have great self-confidence in this area. Whether it’s warranted is another story. I’m constantly hearing lenders boast about how much their customers love them, only to find that their retention rates are dismally low. According to STRATMOR data, the industry average for borrower retention over the past five years is less than one in five loans (18%). They must not love their lenders that much.

Increasing loyalty goes much further than simply tracking a KPI like “Likelihood to Use Again.”

If you really want to inspire faithfulness in your borrowers, you need to do at least one of three things:

1. “Wow” them. As technology continues to improve, we’re likely to see more servicers (and especially Correspondent call center teams) greasing the wheels of loan applications for their portfolio customers. The path of least resistance is often a very attractive path for borrowers. To combat this, LOs need to look for ways to go “above and beyond” in their level of service and care to their borrowers, not just to win the deal, but to keep the customer’s loyalty for life. Differentiating your service level might be as simple as laying out and following a consistent and proactive communication schedule that incorporates calls, texts and emails. This may sound basic, but trust me, it’s rare.
2. Surprise them. You know what really surprises borrowers? A pain-free loan process. For the past decade, STRATMOR has tracked the most impactful elements of the loan journey in creating repeat business and referrals. The Seven Commandments, as we call them, are very often the difference in a person singing your praises to friends and colleagues versus badmouthing you. Get all seven right and your Net Promoter Score (NPS) is in the mid-90s. Get even one wrong and NPS falls by 75 points. Borrowers tend to think of mortgage lenders in the same way you think about your dentist. If your last visit was quite painful, you might consider trying a new one next time. If it was pain-free or even pleasant, then going somewhere new might seem risky.
3. Make a lasting impression. If you survey borrowers within the first week after their closing, they’re generally pleased and still riding the high from getting the keys to their new house or seeing a lower monthly payment due to a refinance. According to data from STRATMOR’s MortgageCX program, the National Average for NPS in Q2 2024 was 82! Survey the same people in 6 months or a year, however, and NPS scores drop by around 40 points. The “shine” wears off quickly! To earn and maintain real estate in your customers’ heads, you’ll need to do something unforgettable. That might be an extravagant gift, or something more personal that earns you a spot in their “friend” category. It takes some creativity, but once you start looking, you’ll be surprised at how quickly the ideas come.

Prescription

Here are three practical ways you can start shark-proofing your business today:

1. Send a handwritten Birthday card and gift. You already know your borrowers’ birthdays from the loan applications, so every time you take an app, mark your calendar and include a personal detail (e.g., they love BigTen Football, they like McFlurries, their kids play soccer). Then send them an actual birthday card, handwritten. You might additionally include a gift card or send them a small gift from Amazon, but don’t skip the handwritten part, which helps place you in the coveted “friend zone.” This takes some organization but will go a LOT further in creating loyalty than a thank-you card or plant at closing. And it will go exponentially further than those impersonal automated birthday card services.
2. Educate your teams on NPS drivers. If you’re not already doing it, start tracking STRATMOR’s Seven Commandments. Make sure every LO and processor is aware of the make-or-break nature of these aspects of the loan journey related to loyalty and advocacy. MortgageCX can help with that. Remind them that a “perfect loan,” one where all Seven Commandments are followed, produces a 97 NPS.
3. Connect with borrowers on social media. LOs have a small, but important window — the three to six weeks during the loan process — where they become thick as thieves with their borrowers. If you’ve done a good job developing rapport with your borrowers, that’s the perfect time to follow them on social media accounts and request to be friends with them on Facebook (if they have it). It won’t work every time, but the ones who accept will, without really knowing it, start to become part of your personal life and vice versa.

If you’d like to discuss STRATMOR’s MortgageCX program in more detail, call me at the number below or find time on my calendar to set up a free consultation.

MortgageCX is now integrated with Encompass^®!

To find more Monthly Customer Experience Tips, click here.

How Can We Help?

Feel free to reach out with any questions or needs we might be able to help with.

Follow us on social media:

Site Map