The Data & Analytics division of Black Knight, Inc. (NYSE:BKI) released its latest Mortgage Monitor Report, based upon the company’s mortgage performance, real estate and public records datasets. This month, the company looked into Q3 2020 mortgage originations – with a focus on refinance lending – and mortgage servicers’ success in retaining the business of refinancing homeowners. As Black Knight Data & Analytics President Ben Graboske explained, while Q3 2020 quarterly origination volumes broke records across the board, retention rates have suffered amid the surge of lending activity.
“As our rate lock data had suggested last month, Q3 2020 originations hit record highs in purchase, refinance and overall lending as record-low mortgage rates and a delay to the normal spring home-buying season spurred both the purchase and refinance markets,” said Graboske. “Some 2.7 million homeowners refinanced their first-lien mortgages in the third quarter, bringing the total through September 2020 to 6.4 million. What’s more, consolidated rate lock data from Black Knight’s Compass Analytics and Optimal Blue divisions suggests that number could climb above 9 million by year’s end. And, with rates continuing to sit at record lows, refinance incentive remains at historic highs. As of the last week of November, 19.4 million 30-year mortgage holders could likely both qualify for and benefit from a refinance.
“However, despite record levels of incentive and lending, mortgage servicers continue to struggle to retain customers, losing the business of more than 80% of homeowners who refinance. Pricing appears to be a significant factor in servicers’ ability to retain customers, as homeowners who changed lenders received noticeably better rates than those whose business was retained. In today’s rate environment, and up against fierce competition, lenders need the most precise product and pricing intelligence available. That said, successful retention likely goes beyond pricing to also include a positive customer experience. This is one reason why Black Knight has invested so heavily in technology that helps our servicing clients provide their own customers with the sort of support and experience that engenders loyalty and improves retention.”
This month’s data also showed 2020 is on pace to reach nearly $4.4 trillion in first-lien mortgage originations in the calendar year, easily the largest such volume on record. The third quarter saw record levels of refinance lending, at $867 billion, purchase lending ($455 billion) and total lending ($1.3 trillion). Black Knight’s rate lock data suggests origination volumes could remain at or above those record levels through Q4 2020, as well. Factoring in a 45-day lock-to-close timeline, and assuming consistent lock-to-close rates, purchase volume is likely to remain roughly level in Q4 2020, while refinances and total lending could edge slightly higher (+5% and +2% respectively).