Together we can change the idea of having a consultation with your mortgage servicer before you refinance from never considered into an absolute necessity.
The Mortgage Servicer Advantage
The Problem, the Opportunity and the Solution
The Problem:
The problem for servicers is that when a homeowner pays off a typical $250,000 mortgage after four years the expected servicing cash loss over the estimated life exceeds $5,000, reducing assets and increasing P&L expenses. Nearly 80% of homeowners leave their servicer when they refinance, yet according to the 2015 J.D. Power Mortgage Servicer Satisfaction Study – 72% of all borrowers are satisfied with their mortgage servicer.
The problem for homeowners is that the day of the salaried loan officer is long past. Today’s loan originators are not compensated to give customers advice; they are compensated only if borrowers use them to refinance. Refinancing a mortgage is likely to be one of the largest and most complex financial transactions a person will undertake in their lifetime, which is why it is so very important for homeowners to have a solid, fundamental understanding of their current loan to determine if refinancing is truly in their best interest. Many homeowners last year refinanced into new 30 year mortgages, with no cash out, reducing their interest rate by just one half of a percent or less and increasing the term of their mortgage by several years. Additionally, many homeowners paid large fees to lenders to refinance their mortgage with practically no rate reduction, to get a relatively small amount of cash out and increasing the term of their mortgage by several years. No one was there to advise these customers on alternative solutions such as a home equity loan or line of credit. A financial planner would have probably suggested that these loans were unwise decisions, but unfortunately these homeowners received their expert advice from loan originators. This disservice to homeowners is likely to increase as interest rates rise.
The Opportunity:
The opportunity for servicers to retain existing customers through education is not being used to its fullest and can have an enormous impact on the company’s bottom line. There are hundreds of millions of dollars in additional revenue to be made for servicers who proactively educate borrowers that they may be better off with the loan they have. This competitive advantage not only helps you retain existing customers it will also protect servicers’ reputations and will not be viewed as a threat by investors.
Over 66 million homeowners in America have mortgage debt and access to the Internet and millions of them search the Internet for refinance information every year. Having a retention strategy in place to capture these individuals needs to be an imperative business practice. Additionally, a servicer originating a new loan for an existing customer is a relatively low-cost endeavor. Most of the paperwork is already in place and the time needed to process the application is minimal. As a result, the origination fees that an existing customer will pay can be lower than those paid by a new customer.
The Solution:
The solution is for mortgage servicers to provide easily accessible specialized licensed loan originators Customer Retention Specialists (CRS) to help their existing customers make better decisions. aboutMYmortgage.com helps homeowners by providing a direct channel for communicating with a customer retention specialist provided by their mortgage loan servicer. The spirit of customer advocacy needs to extend beyond the refinance arena because servicers, or servicers’ designated representatives, can provide their customers so much more. Servicers can offer their customers valuable information about their existing mortgage, a home equity loan or line, refinancing options, mortgage modification and/or other products that servicers may offer. Consumers, and their servicers, will benefit if customers decide 1) it is best to refinance, 2) they determine that it is better to keep their existing loan or 3) take advantage of better alternatives to refinancing for their particular situation.
The aboutMYmortgage.com, LLC’s patented “Method for Mortgage Customer Retention” is based on our vision that: One day all borrowers who are considering refinancing will be provided an opportunity to discuss refinancing, and alternatives to refinancing, with their current mortgage servicer. Servicers’ CRSs will help their existing customers make better decisions through aboutMYmortgage.com’s Preferred Servicer’s portal.
How Mortgage Servicers or subservicers benefit by adding, or outsourcing, licensed Customer Retention Specialists (CRSs).
- Places Servicers in an arena where other lenders can’t compete
- Provides servers an opportunity to earn customer loyalty
- Retain borrowers who are intending to refinance and protect revenue stream
- Educate customers about their mortgage options
- Protect reputation risk by reducing unnecessary complaints to the Consumer Protection Finance Bureau (CFPB)
- Demonstrate to investors such as Fannie Mae, Freddie Mac, FHA and regulatory bodies that the servicer is taking a proactive approach to borrower inquiries and concerns
- Increased customer satisfaction
- Increased customer retention
- Reduce the deferred acquisition costs of refinancing
- Increased value of the MSRs
How Homeowners benefit from aboutMYmortgage.com sending them to their existing mortgage servicer.
- Homeowners learn the facts about their existing loan from their servicers that loan originators cannot provide and perhaps save thousands of dollars.
- Servicers can provide homeowners the opportunity to discuss concerns and resolve issues directly with their servicer instead of submitting a complaint with the Consumer Protection Finance Agency (CFPB), or other regulatory body, or the press.
- Servicers can provide homeowners an upgraded understanding of all options available including but not limited to mortgage calculators with their present loan information included, refinancing, loan comparison calculators, mortgage modification, home equity loans, bi-monthly payment programs, escrow analysis, re-amortization (recasting), advice and other products and services.
When is refinancing not a good idea – Common Example #1
Borrowers are often better off with the loan they have versus refinancing and beginning the amortization process once more. The following amortization table shows how refinancing late in the mortgage, customers restart the amortization process and most of their monthly payment will be credited to paying interest again and not to building equity.
Amortization Table
When refinancing is not a good idea: Common Example #2
If a homeowner plans to move from their home in the next five years, the monthly savings gained from lower monthly payments may not exceed the costs of refinancing. Refinancing can be expensive – below are the typical costs associated with refinancing:
Application fee ($75 to $300). Homeowners pay this fee even if a new loan is denied.
Loan origination fee (up to 1.5 percent of the loan principal). This charge is to evaluate and prepare the loan documents.
Appraisal fee ($300 to $700). Sometimes this cost is folded into the application fee.
Inspection fee ($175 to $350). The lender may ask that the borrower get the home inspected for structural problems, termites and other pests.
Attorney review and closing fee ($500 to $1,000). The borrower may get charged for the lawyer who conducts the closing for the lender.
Title search and insurance ($700 to $900). This will cover the cost of searching the property records to make sure that the borrower is the rightful owner and to ensure there are no liens against the property.
Survey fee ($150 to $450). This fee may be waived if a survey of the land and buildings has been recently done.
State, City or County Specific charges For example, Florida has an Intangible Tax charge of 20¢ per $100 plus Documentary Stamps charge of 35¢ per $100 of the mortgage amount.
Below is one of several mortgage calculators used to present loan information:
AboutMYmortgage.com is available to train your CRSs to use sales scripts and calculators for comparing present loan to refinance, recasting, loan amortization and discussing cost of a new loan versus keeping an existing loan. Training is scalable and available either onsite or webinar.
To become an aboutMYmortgage.com preferred servicer, schedule a presentation, or receive additional information call 888-684-2220 or email Info@aboutMYmortgage.com.
