Servicers, Expecting Refi Wave, Work on Retention

American Banker (04/01/08) P. 11; Berry, Kate
A refinancing wave could be on the horizon, with experts anticipating a reduction in interest rates of 25 to 50 basis points by the Federal Reserve in the coming months. Mortgage servicers would be hit hard, with monthly prepayments rising as much as tenfold. According to FIS Applied Analytics managing director Kyle Lundstedt, "Prepayment risk is coming back at a time when credit risk is making servicing that much harder. The borrowers you want to keep are the ones you're about to lose." Servicers are now focusing on retention; First National Bank of Omaha Chief Risk Officer Narin Seera said that when he served as senior vice management of risk management at First Horizon National Corp., officials monitored the recapture ratio of loan officers, correspondents and originators to determine whether they were building strong customer relationships or simply pushing loans through. Wakefield Co. CEO Terry Wakefield says servicers could make customized offers to customers, but he notes they likely will not shell out up to $20 million on retention systems at a time when they are aggressively cutting costs. Nevertheless, LoanPerformance senior vice president of business development David Hurt says lenders should use data to identify borrowers they want to keep as customers.