DDM - Financial Services

Mortgage Customer Retention and Recapture

Segment your customers and prospects to optimize your marketing campaigns

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Mortgage Customer Retention and Recapture Better Identify Borrowers That Are Likely to Prepay With Household Total Income Measure case study Challenge: Better Identify Borrowers That Are Likely to Prepay Mortgage originators, servicers, and investors can gain a significant advantage if they can better understand borrowers' current financial capacity and identify loans that are likely to prepay. Given that interest rates are at an all-time low, many borrowers are seeking to refinance, opening a short window of opportunity for mortgage originators and servicers to retain their customer relationship with borrowers and keep mortgages in-house. By better identifying borrowers who are likely to prepay or refinance, mortgage originators and servicers can take steps to enhance their customer retention programs, preserve servicing revenue, generate origination revenue and maintain the opportunity to cross-sell other financial products and services. Investors can better identify loans that are likely to prepay and use that information to make appropriate portfolio management decisions. Solution: Household-Level Total Income Measure Enables Mortgage Executives to Better Identify Loans That Are More Likely to Prepay A comprehensive analysis was conducted on a whole loan portfolio to test the effectiveness of solutions to segment and identify borrowers that were more likely to prepay. The subject portfolio consisted of more than one million loans that were current at the beginning of the year and had prepaid or refinanced by the end of the year. The analysis showed that Income360 ® was effective at identifying loans that were more likely to prepay. Income360 provides a total household income estimate, including income from wages plus income from investments. CHALLENGE Mortgage servicers and investors need new insights into which mortgages are more likely to prepay in order to support customer retention programs and enhance modeling accuracy. SOLUTION Mortgage executives can utilize Income360 household-level total income estimate to better understand borrowers' current financial capacity, and identify and segment loans that are more likely to prepay. RESULTS An analysis that examined performing mortgages across a one year time period showed that Income360 measure: ■ Identified a segment of loans that was up to 7 times more likely to prepay ■ Provided enhanced differentiation even when holding constant Current Combined Loan-to-Value (CCLTV) or credit score groups

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