After years of high interest rates and price spikes, mortgage lenders are optimistic heading into 2025. Fannie Mae predicts a 28% increase in mortgage production to $2.1 trillion. The Mortgage Bankers Association (MBA) also predicts that total production volume will increase by 28.5% to $2.3 trillion.
In addition Fitch expect mortgage servicing rights (MSR) depreciation costs and amortization to increase as prepayments increase. This could negate any profit potential from increased loan volume. To combat this, lenders must maintain their repayment rights to collect the maximum amount of revenue over the life of the loan. Maintaining service also builds stronger customer relationships, keeping customers satisfied and ready to return for more business.
To ensure that retention of maintenance services generates valuable impact, lenders must turn to digital experiences and automated maintenance software to make maintenance easier, keep loyal consumers happy and generate more profits.
Retaining service rights builds revenue and loyalty
Selling maintenance rights can damage long-term relationships with borrowers. According to JD poweroverall customer satisfaction drops tenfold among customers who have switched to a new service provider. In 2023, they reported that overall satisfaction scores are 119 points lower when customers do not choose their service provider.
Fortunately, there is a way around this for knowledgeable people. Effective loan servicing positions servicers as trusted advisors to the homeowner. Additionally, service providers can leverage these relationships to target consumers with value-added services, including asset protection, insurance products, home improvement loans and maintenance options. By maintaining service, lenders can increase their revenue streams and provide a superior customer experience that builds long-term loyalty.
Additionally, lenders can also strengthen relationships with borrowers, providing a valuable opportunity to cross-sell additional financial products. This strategy gives lenders room to market offerings such as credit cards, auto loans and deposit accounts to customers they are already connected to. On the other hand, transferring services removes direct access from these borrowers and cuts off access to their mortgage operations.
Of course, customers are not the only ones who benefit from in-house service. Turnover can also skyrocket because well-trained staff with the right servicing software can handle 700 or more loans individually. Considering the average loan size of $403,000 in November 2024, in addition to the standard servicing fee of 25 basis points for the year, each service agent can generate more than $700,000 in annual service fee revenue alone. Late fees and commissions on optional insurance can also increase revenue.
These benefits together create a decisive competitive advantage for these institutions.
Maintenance software improves efficiency and customer satisfaction
Modern mortgage management software gives lenders an advantage so efficient it almost seems unfair. Servicers can automate critical tasks, such as investor reporting and compliance, to streamline workflows and position internal servicers to win quickly. Digital technologies help lenders reduce errors, save costs and shorten processing times. JD power also found that satisfaction with digital channels was one of the key drivers behind higher customer satisfaction scores for mortgage servicers in 2024.
Application programming interfaces (APIs) play a key role in this transformation. APIs enable seamless communication between maintenance applications and other systems. They can automate workflows by integrating software programs, reducing manual intervention and minimizing human-induced errors. This automation reduces staff hours and operational costs, giving borrowers faster access to digital loan information. Improvements in problem resolution and satisfaction with digital channels are the key drivers for greater customer satisfaction. If this doesn’t clarify why digital service solutions are important, perhaps nothing will.
Here’s a great example: FICS’ Mortgage Servicer software maximizes servicer capabilities by automating key housekeeping activities, including payment processing, investor reporting, escrow administration, custodial accounting, imaging and report writing. Borrowers also benefit from easy online access to statements and real-time account information. By leveraging advanced mortgage servicing software, lenders can meet the demands of investors and regulators while strengthening borrower relationships through faster, more accurate service.
Maintenance software simplifies compliance and investor reporting
A crucial function of mortgage servicing software is the automation of investor reporting. This is a critical task for service providers who must routinely report payment and default activity to government sponsored enterprises (GSEs). These reports must meet daily and monthly funding requirements, reconcile custodial accounts, and resolve discrepancies while adhering to specific reporting criteria.
Platforms such as Mortgage Servicer can handle all industry standard reporting methods. They automatically generate essential reports including reconciliation, transfer, delinquency, prepaid, and balance reports. They also manage advances and recoveries on principal and interest (P&I) and taxes and insurance (T&I). This locks in compliance and efficiency in a highly regulated environment.
Equally important is immediate access to comprehensive loan data. Although standard reports are provided, servicers often require customized reports for more effective loan management. Mortgage advisor gives lenders access to extract any data from the system or database tables. With this access, lenders have complete flexibility to customize reports or create files for integration with other software. Data can also be exported in various formats.
This level of data accessibility and portability is important to achieve efficiency. Whether sharing data between systems or migrating to a new vendor, the ability to freely manage data provides operational flexibility and peace of mind. Robust mortgage servicing software allows lenders to adapt to changing needs, collaborate with multiple software providers, and maintain full control over their data.
As the mortgage industry enters a period of stabilization and growth, lenders have a rare opportunity to strengthen their operations and customer relationships by maintaining service delivery. By embracing automation, improving compliance workflows and delivering seamless digital experiences, lenders can maximize efficiency, increase borrower satisfaction and create new revenue streams.
As competition intensifies, those who invest in robust service tools and customer-centric strategies will be well-positioned to build long-term loyalty and thrive.
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