Spend enough time around mortgage conferences, and you'll hear impressive recapture numbers tossed around with surprising confidence. "We have a 70 percent recapture rate." "Ours is even higher." On the surface, those figures suggest the industry has largely solved borrower retention. Yet that conclusion starts to unravel as soon as you ask a simple follow-up question: How are you calculating it? That particular question turns out to be far more revealing than the percentages themselves because everyone seemed to be measuring something slightly different.
Part of the confusion stems from the fact that "recapture" has become a catch-all term. Some lenders count only rate-and-term refinances. Others include streamlined government refinances. Some measure only borrowers who were actively shopping for a new loan, while others begin with every serviced borrower and work backward from there. Even the numerator and denominator vary from company to company, making comparisons nearly meaningless.
A headline recapture percentage may sound impressive, but without understanding what loans were eligible, which borrowers actually completed a refinance, and how many simply sold their homes instead, the number tells us very little about operational performance. It becomes more of a marketing statistic than a management tool.
Obviously, servicing portfolios have become significantly more complex than they were even a decade ago. Today's servicers have access to richer borrower data, better analytics, and more sophisticated ways of identifying customers who may benefit from a refinance, second lien, or home equity product.
And borrowers themselves have become harder to categorize. Some are moving rather than refinancing. Others appear eligible until updated taxes, insurance premiums, or debt obligations change the economics of the transaction. Looking only at the loans that closed overlooks the much more valuable question: Were those the right borrowers to pursue in the first place? If the underlying opportunity set is misunderstood, even the best sales execution will produce misleading conclusions.
That is why analytics increasingly sit at the center of the recapture conversation. The objective is no longer to contact every borrower whose rate appears out of market. It is to identify homeowners whose financial circumstances, equity position, and borrowing needs suggest there is a realistic opportunity to improve their situation. Servicing data has become far more than an operational record. It has evolved into a decision-making asset, allowing lenders to prioritize meaningful conversations instead of broad marketing campaigns. Ironically, the companies producing the strongest retention results may not be the ones making the most outbound calls. They may simply be asking better questions before they make them. Viewed through that lens, the industry's fixation on recapture percentages begins to feel misplaced.
Mortgage Servicing Rights (MSRs), and the value of them, is instrumental in this discussion. No one cares about owning servicing rights “for their health.” There is a reason that Rocket, UWM, Mr. Cooper, CrossCountry, Two Harbors, Fairway Independent, the large money center banks, and others want theirs as well as yours. Whatever company “owns” the servicing arguably has the inside track as to if and when the borrower refinances the loan. On top of that, companies have opportunities to connect with customers in general.
So yes, servicing is a revenue source, but far-sighted owners of the MSRs try to fully utilize these opportunities and foresee the advantages or disadvantages of owning certain types of servicing. Owners of mortgage servicing rights need to provide value to customers, something that seems to become more important every year.
Servicing is not easy, or something that can be done cheaply. There’s more time for problems to arise, more time for borrowers who weren’t happy with the initial loan process initially to find faults in the servicing. An institution may want to retain servicing in its banking footprint, but if this servicing is not valuable to others, the book value may decline, for example. Many companies “farm” the servicing out to subservicing institutions, adept at the compliance, regulatory, and customer service nuances. A decline in interest rates will drive down the value of servicing rights, as noted above, as the odds of loans refinancing and paying off early increases.
There is definitely a school of thought, often backed up by statistics, stating that borrower “touches” are more important than owning the servicing rights. Depending on the original loan’s processing, many borrowers will remember their original loan officer more than they remember the company servicing the loan. And when that MLO has a consistent program to reach out to previous clients, and remind them that referrals are important, the success rate of recapture moves higher.
Retention has never been a contest to produce the highest number on a conference slide. It is an exercise in understanding customers well enough to know when a mortgage is no longer the right solution and when another product, or no product at all, better serves the homeowner. Until the industry agrees on how success should be measured, debates over who has the best recapture strategy will continue generating more heat than insight.
