Retention charges are falling to hit lows for mortgage service suppliers

Black Knight said servicers struggled to bring their borrowers back when the overall retention rate hit rock bottom in the fourth quarter.

The retention rate dropped to 18% from 20% a year earlier, while it remained stable from the third quarter onwards, according to the Mortgage Monitor report. This is only the third time it has fallen below 20% since the fourth quarter of 2006.

Disbursement refinances – which are proving more difficult to recapture – had a retention rate of 11%, compared to 17% annually and 12% quarterly. Interest-rate and time-limited refinancing showed a retention rate of 23%, a decrease of 24% in the previous year and of 22% in the third quarter.

Nearly 2.8 million borrowers refinanced their mortgages in the final quarter of 2020, bringing the total to a record $ 869 billion. Black Knight's lockout rate data through mid-February, which requires a 45-day closure period, shows that refinancing will remain at a high level for the first quarter of 2021.

While recent hikes pushed interest rates to eight-month highs and slowed borrower activity, another 2.8 million homeowners are expected to refinance by the end of March. Black Knight's numbers show that this would be a 25% decrease from the previous quarter.

"With rising interest rates, refinancing incentives have been severely restricted. Almost 13 million high-quality refinancing candidates are still on the market – a decrease of almost 30% in the last three weeks," said Ben Graboske, President Data and Analytics at Schwarzer Ritter, said in the report .

Servicers were unable to retain an estimated 2.3 million borrowers in the fourth quarter of 2020. Mortgage service technology is considered to be breakdown in areas where customer loyalty exists.

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