Lost-sales analysis: a must for mortgage lenders and servicers.

AuthorBiundo, Rosie
PositionSERVICING

THE HUSBAND-AND-WIFE HOMEOWNERS just had twins, need more space and can afford a more expensive home. The market is hot where they live, and they are thinking about listing their two-bedroom ranch home and looking around for something bigger.

At what point does a mortgage lender need to spring into action to ensure it keeps this couple happy and writes their next loan? The short answer: As early as possible.

Otherwise, the mortgage lender risks losing business to more competitive offers or passing on deals that are now performing well for other lenders. Not only does the lender lose the immediate profit on the home purchase, but also the long-term revenue generated throughout the life of the loan.

More importantly, it loses the priceless opportunity to build a customer relationship that drives future borrowing and word-of-mouth references.

But it doesn't have to be this way. Thanks to a more actionable data analysis--known as a lost-sales analysis--mortgage lenders can gain new insights to help them engage in customer-retention activities much earlier in the process. They also can better understand what may have gone wrong when they lose customers.

A lost-sales analysis begins with the mortgage lender's own loan application data. The data is used to produce a reporting file of which competitors won the loans, and the terms of those loans--such as interest rate and amount borrowed (based on public record property data). Lenders and servicers can then assess whether the opportunities were lost due to a specific type of product being offered or a lower rate, for example.

This analysis is fundamental to mortgage loan servicers, who need to truly understand their portfolios and their customer-retention strategy.

The lost-sales analysis, by providing perspective at various points in the mortgage loan life cycle, allows lenders and servicers to achieve multiple business goals with access to property data public records that help indicate where a lost applicant ended up closing a mortgage or home equity loan, as well as the characteristics of that loan.

The result is highly specialized, competitive lending insights that can spark questions such as: Did a customer go to a competing lender because of geography, better interest rates or better customer service?

Or, in regard to maintaining customers, did your mortgage company nurture the customer with the right amount of touches? Or perhaps it was the process that pushed the customer away. For...

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