Well, that servicer retention rebound didn’t last long.
Among the takeaways from the latest Mortgage Monitor report from Intercontinental Exchange (ICE) was that the recovery in servicer retention seen during the first quarter this year was a short-lived one. Retention of refinancing borrowers had bottomed out into a 17-year low in the fourth quarter of 2023, but bounced back in the opening quarter this year.
Lenders, for example, retained 29% of rate-and-term refis in Q1, up from 13% in Q4 2023. The retention rate of borrowers refinancing out of recent loans was also noteworthy: servicers retained 31% of refis out of 2022 vintage loans and 47% of refis out of 2023.
At the time, ICE speculated that the bounceback could bode well for future retention, especially considering the upcoming activity that could be driven by loans around the same vintage with high interest rates. But just one quarter later, retention rates have plunged again.
Servicers retained just one out of every five refi borrowers in Q2, down from 25% quarter over quarter to fall to the second lowest retention rate in 17 years (trailing Q4 2023). The retention of rate-and-term refinancers fell back down to Earth, dropping to 16%, a plunge of 13 percentage points.
Notably, while nonbanks substantially outperformed banks in retaining refinancers (as they have generally done of late), much of the total retention slide during the second quarter came because nonbank retention fell. After retaining 34% of borrowers in the first quarter, that share dipped to 28% from April through June for nonbanks.
Also notable — and a potential silver lining — was that the retention dropoff was driven chiefly by loans in more seasoned vintages. Servicers remained successful in hanging on to borrowers refinancing out of recent loans, with a 41% retention rate in 2023 mortgages and 34% in 2022 loans. Per ICE’s report, “the recent dip in rates that has brought more refinance incentive to the market, especially among recently originated loans … may have a positive effect on retention metrics in Q3.”
