Black Knight: Servicer retention rates are falling as refinances are rising

Mortgage & Real Estate

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While refinances have risen throughout the year, fewer and fewer borrowers are staying with their servicers after they refinance.

A new report from Black Knight shows that servicers retention rates fell in the third quarter this year.

That decline came as refinance lending hit its highest point in nearly three years, Black Knight says, up 94% over the last three quarters.

Refinancing hit a significant low in Q4 2018, falling to the lowest level in 18 years.

Now, with refinances on the rise, retention rates are at 22% post-refinance, Black Knight said.

Meanwhile, rate and term refinance retention fell 3%, from 26% to 29% in Q2.

Cash-out retention fell slightly from 20% to 19%, the lowest retention rate among that segment in over two years.

Black Knight Data & Analytics President Ben Graboske said that despite refinance volumes hitting their highest point in nearly three years, retention rates fell in Q3 2019.

“While refinance activity is up across the board, the characteristics of refinancing borrowers – along with their motivation and ‘trigger points’ to refinance – are anything but uniform,” Graboske said. “Advanced portfolio and market analysis can help servicers better understand changing borrower dynamics and tune their strategies accordingly.”

This month’s report also took a look at the Q3 2019 equity landscape, which uncovered that tappable equity declined in Q3.

Now, total tappable equity is at $6.2 trillion, which is the largest Q3 volume on record, but still down 1% from Q2. Despite this, tappable equity grew 5% year over year, a new high since 2018.

“After hitting an 18-year low in the fourth quarter of 2018, refinance lending has nearly doubled since then,” Graboske said in a release. “The bulk of that increase was driven by people refinancing to improve the rate or term on their current mortgage, with five times the number of such rate/term refis as there were in Q4 2018.”
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