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.