Customer for Life: Recapture and Recruiting Brokers and Branches

Customer for Life: Recapture and Recruiting Brokers and Branches

The title of this article is an exercise in cognitive dissonance.   How is the notion of a lender keeping a customer for life consistent with recruiting wholesale brokers?  How is call center recapture consistent with recruiting traditional retail branches?  Recapture… is this just an MSR valuation exercise or is there long-term value in customer relationships that is not captured in that financial asset.  Surprisingly, these topics all work together and have become increasing important in multi-channel production, profitability and growth strategies.

Non-Solicitation Designation in Servicing Released Sales, Intro, Strategic and Economic Considerations.

Many originators have been presented with a new solicitation option when selling their servicing on a released basis.  Specifically, some servicers and aggregators are giving sellers the choice to keep solicitation rights - the servicer agrees not to solicit the servicing customers its buys from the seller.  Naturally, the option comes at a price in the form of a lower service release premium (SRP) and we will discuss those economics in part 2 of this series. 

As a lender, or a loan officer (LO), a loan’s income opportunity extends beyond the first transaction.  Whether the lender retains the servicing or not, lenders and LO’s increasingly pursue ways to deepen the relationship with the borrower so they can capture their next loan transaction.   

Let’s consider the principal actors are in the origination process by channel:

  Marketing Lender's Customer Closest Borrower Relationship
Call Center Advertising, social media, search engines Borrower Lender
Retail LOs calling on realtors, previous customers, social media Borrower Loan Officer
Wholesale AEs calling on brokers, advertising, social media Broker Broker LO
Correspondent AEs calling on lenders, advertising, social media Lender Lender LO

To the lender or LO, future loan scenarios for a borrower include a new home purchase within the same  community, relocating to another community, or pursuing a rate/term refinance or cash-out refinance.  For many bankers, additional business can also include a second or HELOC to pay for home improvements, debt consolidation or other life events.  Contact with the borrower will likely be both proactive and reactive, with marketing efforts to encourage borrowers to return to the originator when they have a financing need.  If the borrower is not reaching out, the lender and LO need to react to certain triggers as quickly as possible. 

Triggers that the servicer may receive include calls to the servicer about other financing options or (usually too late) a payoff quote.  Other triggers include borrower response to outbound mail, phone or digital marketing, which also require immediate follow-up.  Sophisticated lenders may subscribe to services that provide additional ‘soft triggers’ – indirect indications that the borrower is considering a change that requires real estate finance.  Servicers or lenders can also use pre-screening credit pulls to identify lending offers they can make to specific borrowers.  The following two tables illustrate common triggers and how solicitation agreements may impact how the triggers are deployed - with consideration of channel. 

Post-Closing Customer Contacts & Relationships for Released Sales

Sale Method Solicitation Call Center Servicing Triggers Trigger Notices
Traditional Servicer Servicer To Servicer Yes/No - To Servicer
No Servicer Solicit - Seller Recapture Seller Seller To Seller To Seller?
No Servicer Solicit - TPO Recapture Originator N/A To Seller to Originator To Seller to Originator?

Post-Closing Customer Contacts & Relationships for Retained Sales

Sale Method Solicitation Call Center Servicing Triggers Trigger Notices
Retail - Loan Officer Recapture Servicer N/A To Loan Officer To Loan Officer
Retail/TPO - Call Center Recapture Servicer Servicer To Call Center To Call Center
No Servicer Solicit - TPO Recapture Originator N/A To Originator To Originator?

The two tables above show how lenders, aggregators, co-issue buyers and subservicers are creating contract terms, technology and workflow to give originators recapture options.   To simplify, the different sale methods represent a lender’s ability to make the borrower’s next transaction, whether directly or through their TPO originators.  The hard, yet necessary part, is figuring out how to attribute value to these different sale methods.  To do that, in the next post we’ll introduce a simplified model for assigning that value. 

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