Key facts
- The mortgage industry is losing customers by focusing on 'recapture' strategies instead of earning loyalty.
- Lenders are advised to prioritize human interaction and proactive service over automated communication.
- Measuring customer engagement beyond rate comparisons is crucial for long-term retention.
- The author's company improved retention by reinvesting in customer service staff after a period of cuts.
- Proactive customer service, such as discussing insurance policy details, can be highly valuable to borrowers.
The mortgage industry's reliance on 'recapture' strategies to win back customers is a flawed approach that fails to address the root causes of customer attrition, according to Murrey McKee, founder and CEO of My Utilities. McKee argues that true customer loyalty is earned through proactive, human-centered service, not through automated communications or a singular focus on rates.
McKee highlights that while lenders are seeing improved refinance retention rates, they are still losing a significant portion of borrowers. The cost of originating loans is high, making each lost customer expensive. The comfortable explanation for this loss is often attributed to interest rates, which lenders cannot control. However, McKee suggests the industry's own design of a fast, quiet mortgage process, coupled with automation that minimizes borrower interaction, has eroded relationships.
Lenders have invested in software that replaces human interaction with automated messages like birthday emails or rate-drop alerts, which borrowers often ignore. This leaves price as the sole differentiator when a new loan opportunity arises. McKee draws a parallel to Chick-fil-A, which thrives not on being the cheapest, but on consistent, positive customer experiences with human interaction.
Evidence suggests borrowers are already noticing this gap, with a ServiceLink survey indicating that nearly as many recent buyers sought mortgage information from AI chatbots as from lenders or loan officers. McKee shares his own company's experience, where cutting customer service in 2022-2023 led to record-low retention, a situation only rectified by reinvesting in staff who could provide direct assistance.
To build lasting loyalty, McKee proposes three strategies: improving the closing experience by offering personalized assistance, changing measurement metrics to track human engagement beyond just rate inquiries, and ceasing service cuts to protect margins. He emphasizes that a borrower who feels valued and supported is less likely to need 'recapturing' in the first place.