Tag: mortgage

It’s been over 10 years since the first rumblings of Great Recession started in 2008. Today, Americans are experiencing high levels of consumer confidence, marked by high employment rates and increasing credit balances over last year. What have we learned over the last decade? And how do we compare to our behaviors then? Experian released the 9th annual state of credit report, which provides a comprehensive look at the credit performance of consumers across America by highlighting consumer credit scores and borrowing behaviors. Who’s faring the best since the recession? According to the data, younger consumers. “We’re continuing to see the positive effects of economic recovery, especially among younger consumers,” said Michele Raneri, Vice President of Analytics and Business Development at Experian. “Since the recession, responsible credit card behaviors and lower debt among younger consumers is driving an upward trend in average credit scores across the nation. Over the last ten years, those 18 – 21 increased their credit scores by 23 points on average compared to those 18-21 ten years ago.” As a whole, 2018 was a year marked by financial reform, consumer protection and the return of volatility for the financial markets. A large portion of the analytics from this year’s report took a close look at the credit behaviors of today and compared them to 2008, the year the US headed into the worst recession in 80 years.     10-Year Lookback 2008 2017 2018 Average number of credit cards 3.40 3.06 3.04 Average credit card balances $7,101 $6,354 $6,506 Average number of retail credit cards 3.03 2.48 2.59 Average retail credit card balances $1,759 $1,841 $1,901 Average VantageScore® credit score [1,2] 685 675 680 Average revolving utilization 28% 30% 30% Average non-mortgage debt $23,929 $24,706 $25,104 Average mortgage debt $191,357 $201,811 $208,180 Average 30 days past due delinquency rates 5.4% 4.0% 3.9% Average 60 days past due delinquency rates 2.9% 1.9% 1.9% Average 90+ days past due delinquency rates 7.1% 7.3% 6.7%     In regards to credit scores, the average VantageScore® credit score increased 5 points from last year, reaching 680 , while still down from 2008. Segmented by state and gender, Minnesota had the highest credit scores for both men and women. Data also showed that women had higher credit scores than men, consistent with 2017 and 2008.   The past year has been flooded with headlines illustrating increased spending for American consumers. How do the numbers compare with 2008 data? In comparison with 10 years ago, the number of retail trades since 2008 are down, while average balance is up, according to Experian’s State of Credit Report. Additionally, the number of credit cards is down for all age groups, and balance is also down for consumers 22-71 years of age. Average revolving utilization has creeped up in the past decade, but only two percentage points from 28% to 30%, while both average non-mortgage and mortgage debt has increased 5% and 9% respectively. Not surprisingly, the report reflects that delinquency rates have also increased over 20% since 2008, though down from last year. In conclusion, there’s a lot to learn from both 2008 and 2018. One of the most important and resonating takeaways might be that while fortune may not seem to favor the young, younger consumers are exhibiting responsible behaviors and higher credit scores, setting a precedence for consistent and better financial health in the future. Learn more Experian Boost can help consumers instantly improve their credit score by incorporating their positive payment history from utility and phone bills, among other consumer-permissioned data. [1] VantageScore® is a registered trademark of VantageScore Solutions, LLC. [2] VantageScore® credit score range is 300-850 Calculated on the VantageScore® model. Your VantageScore® credit score from Experian indicates your credit risk level and is not used by all lenders, so don’t be surprised if your lender uses a score that’s different from your VantageScore® credit score.  

Millennials have been accused of “killing” a lot of things. From napkins and fabric softener to cable and golf, the generation which makes up the largest population of the United States (aka Gen Y) is cutting a lot of cords. Despite homeowning being listed as one of the notorious generational group’s casualties, it’s one area that millennials want to keep alive, according to recent statistics. In fact, a new Experian study revealed 86% of millennials believe that buying a house is a good financial investment. However, only 15% have a mortgage today. One explanation for this gap may be that they appear too risky. Younger millennials (age 22-28) have an average near prime score of 652 and older millennials (age 29-35) have a prime score of 665. Both subsets fall below the average VantageScore® credit score* of U.S. consumers – 677. Yes, with the majority of millennials having near prime or worse credit scores, we can agree that they will need need to improve their financial hygiene to improve their overall credit rankings. But their dreams of homeownership have not yet been dashed. Seemingly high aspirations (of homeownership), disrupted by a reality of limited assets, low scores, and thin credit files, create a disconnect that suggests a lack of resources to get into their first homes – rather than a lack of interest. Or, maybe not. Maybe, after surviving a few first-time credit benders that followed soon after opening the floodgates to credit, millennials feel like the combination of low scores and the inability to get any credit is only salt in their wounds from their lending growing pains. Or maybe it’s all the student loans. Or maybe it’s the fact that so many of them are underemployed. But maybe there’s still more to the story. This emerging generation is known for having high expectations for change and better frictionless experiences in all areas of their life. It turns out, their borrowing behavior is no different. Recent research by Experian reveals consumers who use alternative financial services (AFS) are 11 years younger on average than those that do not. What’s the attraction? Financial technology companies have contributed to the explosive growth of AFS lenders and millennials are attracted to those online interactions. The problem is many of these trades are alternative finance products and are not reported to traditional credit bureaus. This means they do nothing to build credit experience in the eyes of traditional lenders and millennials with good credit history find it difficult to get access to credit well into their 20s. Alternative credit data provides a deeper dive into consumers, revealing their transactions and ability to pay as evidenced by alternative finance data, rental, utility and telecom payments. Alt data may make some millennials more favorable to lenders by revealing that their three-digit credit score (or lack there of) may not be indicative of their financial stability. By incorporating alternative financial services data (think convenient, tech-forward lenders that check all the boxes for bank removed millennials, not just payday loan recipients), credit-challenged millennials have a chance at earning recognition for their experience with alternative financial services that may help them get their first mortgage. Society may have preconceived notions about millennials, but lenders may want to consider giving them a second look when it comes to determining creditworthiness. In a national Experian survey, 53% of consumers said they believe some of these alternative sources would have a positive effect on their credit score. We all grow up sometime and as our needs change, there may come a day when millennials need more traditional financial services. Lenders who take a traditional view of risk may miss out on opportunities that alternative credit data brings to light. As lending continues to evolve, combining both traditional credit scores and alternative credit data appears to offer a potentially sweet (or rather, home sweet home) solution for you and your customers.   *Calculated on the VantageScore® credit score model. Your VantageScore® credit score from Experian indicates your credit risk level and is not used by all lenders, so don't be surprised if your lender uses a score that's different from your VantageScore® credit score.

Hispanics are not only the fastest growing minority in the United States, but according to the Hispanic Wealth Project’s (HWP) 2017 State of Hispanic Homeownership Report, they would prefer to own a home rather than rent. Hispanic Millennials—who are entering their home-buying years—are particularly eager for homeownership. This group is educated, are entrepreneurs and business owners that over index on mobile use, and 9 of 10 say wanting to own a home is part of their Hispanic DNA. For them, it’s not a matter of if but when and how they will become homeowners. An optimistic outlook is also a trait of Hispanic Millennials, who generally are more positive about the future than the average Millennial. They are also confident in their ability to handle different types of tasks that are part of their day-to-day lives. And at 35 percent, the share of bilingual Hispanic Millennials with a household income of $100,000 or more is consistent with U.S. Millennials as a whole Homeownership challenges Yet, despite their optimism and goal of homeownership, Hispanic homeownership at 46.2 percent lags when compared to the overall U.S. home ownership rate of 63.9 percent in 2017. There are signs the gap could narrow; Hispanics are the only demographic to have increased their rate of homeownership for the past three years. Moreover, the report shows Hispanics are responsible for 46.5 percent of net U.S. homeownership gains since 2000. Still, the 2017 State of Hispanic Homeownership Report notes that a shortage of affordable housing, prolonged natural disasters in states with a significant Hispanic presence (California, Florida, Texas), and uncertainty over immigration policy could hinder Hispanic homeownership growth. An opportunity to reach Hispanics It seems most Hispanic Millennials will strive for homeownership at some point in their life, as they believe owning a home is best for their family’s future. With no convincing needed, there is a tremendous opportunity for mortgage providers to look deeper into the reasons behind Hispanic Millennials’ optimism to determine how to insert themselves into that dynamic. Research highlights the importance of creating interest in financial advice and making this a potential means of gaining trust. Hispanic Millennials who gain a better understanding of the benefits—not only for them but for generations to come—and costs of owning a home may translate their confidence into action.

  The economic expansion just passed the eight-year mark, and consumer credit defaults across mortgages, bankcards and auto loans are at pre–financial crisis levels. More specifically: The first-mortgage default rate dropped 4 basis points from May to 0.60%. The bankcard default rate experienced its first drop in 9 months, with a decrease of 4 basis points bringing it to 3.49%. Auto loan defaults decreased 3 basis points from the previous month to 0.82%. With inflation at 1% to 2%, debt service levels close to record lows, and disposable income increasing and supporting spending growth, consumers are in good financial shape nationally. Lenders should take this opportunity to review and adjust their acquisition strategies accordingly. Can your originations platform capitalize on this?

Although the average mortgage rate was more than 4% at the end of the first quarter*, Q1 mortgage originations were nearly $450 billion — a 5% increase over the $427 billion a year earlier. As prime homebuying season kicks off, lenders can stay ahead of the competition by using advanced analytics to target the right customers and increase profitability. Revamp your mortgage and HELOC acquisitions strategies>

Experian recently acquired a minority stake in Finicity, a leading financial data aggregator enabling innovation in the FinTech industry through its modern RESTful API and Finicity Aggregation Platform. Steve Smith—chairman, CEO and co-founder of Finicity—has a passion and experience in developing innovative and disruptive technology, products and services that leads to efficiency for markets and, ultimately, improvements for consumers. Here he shares his thoughts about disruptive technology in the lending space and its benefits to lenders and consumers. Q: Finicity has said its objective is to take a loan application approval from weeks to minutes using its technology. That sounds pretty great, but how is that possible? How does this play out behind the scenes? A: Well, we’re living in a world where we, as consumers, expect very user-friendly experiences and we expect things to happen at digital speeds. The loan process is no exception. To deliver the experience consumers are expecting requires us to leverage the technology trends of digitization, mobility and big data. Finicity plays a foundational role by leveraging thousands of digital connections across financial institutions to aggregate consumer-permissioned account data. Once we have this data, we’re able to deliver real-time insights into an individual's financial health. This financial health assessment includes income and assets, two critical components to the loan approval process. All that’s required is the borrower to permission use of the data. Once that’s done, we’re able to gather all appropriate data across multiple accounts, rapidly analyze it and send a verification report to the lender. No papers. No multiple requests. No questions on the validity of the data. All done in minutes, not weeks. Q: This is very disruptive technology. What are the benefits for lenders? Consumers? A: Well, as we discussed, one of the major benefits is the speed to a loan. Furthermore, this reduces cost for the lender by maximizing loan officer’s time, while also freeing up loan capital as they can move through loans more quickly with a higher quality assessment. Another benefit for lenders is reduced fraud. Our information on income and assets is coming from real-time bank validated information. This eliminates the possibility of altered data. For consumers, it’s a dramatically simplified process. No need to chase down multiple documents. There are virtually no second requests for information, which we often see in the process. And they’re always in control of their information. All in all, it’s a dramatically better experience for both the lender and the borrower. Q: What sets this solution apart from others in the market? A: A few things set Finicity apart in delivering the quality of insights required. First, we are an industry leader in the number of financial institutions we connect with, ensuring broader access for more customers. Second, 95 percent of our integrations provide access to formatted data, something that’s critical to credit decisioning solutions. In these cases, we’re not screen scraping. This enhances our ability to collect bank validated transactions; we provide the financial institution transaction ID. This provides assurance of data quality. Finally, is our ability to categorize and analyze the transactions. This allows us to identify income streams and assets. Through this process, we’re also able to flag unusual transactions, like large deposits, that may skew actual assets. Q: The future of financial technology is still evolving. What lies ahead? A: We’re very excited about the future of financial technology and the impact that aggregation will have. Whether it’s financial management, digital payments or credit decisioning, real-time data will improve the experiences and the outcomes. As we’re talking about lending, this is one of the spaces that could see significant disruption. Our ability to generate a richer view of an individual’s or organization’s financial health will more accurately determine their ability to repay a loan. This will be a great benefit for those that have thin file or no credit history. We see a world where suitability for a loan will be driven by their actual financial life independent of their use of credit. One of the largest markets in the US is millennials. However, for consumers under 30, two-thirds have subprime or non-prime credit scores and one-third of millennials don't have any credit history. This is just one group underserved because legacy models don’t leverage the full extent of data available. Q: Is there anything else you can tell us about Finicity and its role changing customer experiences across financial service? A: For us, it all comes down to one thing: enabling individuals and organizations to have the information and insights they need to make smarter financial decisions. The data is there. We’re helping to unlock the potential of that data by working with innovative partners like Experian. To learn more about Experian and Finicity's account aggregation solutions, visit www.experian.com/finicity

A recent Experian analysis shows that about 2.5 million consumers will have a foreclosure, short sale or bankruptcy fall off their credit report between June 2016 and June 2017 — with 68% of these consumers scoring in the near-prime or high credit segments.  Additional highlights include: Nearly 29% of those who short-sold between 2007 and 2010 have opened a new mortgage. Delinquencies for this group are below the national average for bankcard and auto loan payments. More than 12% of those who foreclosed now have boomeranged (opened new mortgages). With millions of borrowers potentially re-entering the housing market, the trends are promising for both the mortgage seeker and the lender. Want to know more?

It’s been a wild ride for the financial services industry over the past eight years. After the mortgage meltdown, the Great Recession and a stagnant economy … well, one could say the country had seen better days. Did you watch The Big Short last winter? It all came crumbling down. And then President Barack Obama entered the scene. Change was needed. More oversight introduced. Suddenly, we had the Affordable Care Act, the Dodd-Frank Wall Street Reform Act and the creation of the Consumer Financial Protection Bureau (CFPB). Taxes were raised on the country’s highest earners for the first time since the late-1990s. In essence, the pendulum swung hard and fast to a new era of tightened and rigorous regulation. Fast forward to present day and we find ourselves on the cusp of transitioning to new leadership for the country. A new president, new cabinet, new leaders in Congress. What will it all mean for financial services regulations? It’s helpful to initially take a look back at the key regulations that have been introduced over the past eight years. Mortgage Reform: Long gone are the days of obtaining a quick mortgage.  New rules have required loan originators to verify and document the consumer’s income and assets, including employment status (if relied upon), existing debt obligations, mortgage-related obligations, alimony and child support. The CFPB has also expanded foreclosure protections for struggling borrowers and homeowners. Maintaining the health of the mortgage industry is important for the entire country, and updated rules have enhanced the safety and transparency of the mortgage market. Home values have largely recovered from the darkest days, but some question whether the underwriting criteria have become too strict. Combatting Fraud: The latest cyber-attack trends and threats come fast and furious. Thus, regulators are largely addressing the challenge by expecting banks to adhere to world-class standards from organizations such as the National Institute of Standards and Technology (NIST). The Federal Trade Commission (FTC) and the National Credit Union Administration (NCUA) implemented the Red Flags Rule in November 2008. It requires institutions to establish policies and procedures to identify and recognize red flags — i.e., patterns, practices or specific activities that indicate the possible existence of identity theft — that occur during account-opening activities, existing account maintenance and new activity on an account that has been inactive for two or more years. Loss Forecasting: The Dodd-Frank Act Requires the Federal Reserve to conduct an annual stress test of bank holding companies (BHCs), savings and loan holding companies, state member banks, and nonbank financial institutions. In October 2012, the Fed Board adopted the Comprehensive Capital Analysis and Review (CCAR) rules. This requires banks with assets of $50 billion or more to submit to an annual review centered on a supervisory stress test to gauge capital adequacy. In January 2016, Dodd-Frank Act Stress Testing (DFAST) was introduced, requiring bank holding companies with assets of $10 billion or more to conduct separate annual stress tests known as “company-run tests” using economic scenarios. Every year regulators expect to see continued improvement in stress-testing models and capital-planning approaches as they raise the bar on what constitutes an acceptable practice. CFPB: No longer the new kids on the block, the CFPB has transitioned to an entity that has its tentacles into every aspect of consumer financial products. Mortgage lending was one of their first pursuits, but they have since dug into “ability-to-pay underwriting” and servicing standards for auto loans, credit cards and add-on products sold through third-party vendors. Now they are looking into will likely be the next “bubble,” – student lending – and educating themselves about online marketplace lending. Data Quality: Expectations related to data quality, risk analytics, and regulatory reporting have risen dramatically since the financial downturn. Inaccuracy in data is costly and harmful, slows down the industry, and creates frustration. In short, it’s bad for consumers and the industry. It’s no secret that financial institutions rely on the accuracy of credit data to make the most informed decisions about the creditworthiness of their customers. With intense scrutiny in this area, many financial institutions have created robust teams to handle and manage requirements and implement sound policies surrounding data accuracy. --- This is merely a sliver of the multiple regulations introduced and strengthened over the past eight years. Is there a belief that the regulatory pendulum might take a swing to other side with new leadership? Unlikely. The agenda for 2017 largely centers on the need to improve debt collections practices, enhance access to credit for struggling Americans, and the need for ongoing monitoring of the fintech space. Only time will tell, but one thing is certain. Anyone involved in financial services needs to keep a watchful eye on the ever-evolving world of regulation and Washington.

Millennials are coming of age and experiencing big life moments — college graduation, their first job, getting married and moving out. But what about buying ahome? Here are some things we know: Millennials are 75 million strong 75% say homeownership is a long-term goal Millennials are now the largest living generation. Are you equipped with the right strategies and tools to serve their lending needs? >>Webinar: Are Millenials Mortgage-Ready?

Time heals countless things, including credit scores. Many of the seven million people who saw their VantageScore® credit scores drop to sub-prime levels after suffering a foreclosure or short sale during the Great Recession have recovered and are back in the housing market. These Boomerang Buyers — people who foreclosed or short sold between 2007 and 2014 and have opened a new mortgage — will be an important segment of the real estate market in the coming years. According to Experian data, through June 2016 roughly 800,000 people had boomeranged, with Los Angeles, Phoenix, and Sacramento housing the most buyers. Some analysts believe more than three million Americans will become eligible for a home over the next three years. Are potential Boomerang Buyers a great opportunity to boost market share or a high risk for a portfolio? Early trends are positive. The majority of Boomerang Buyers who opened mortgages between 2011 and June 2016 are current on their debts. An Experian study revealed more than 29 percent of those who short sold have boomeranged, and just 1.5 percent are delinquent on their mortgage —falling below the national average of 2.8 percent. This group is also ahead of or even with the national average for delinquency on auto loans (1.2 percent vs. the national average of 2.2 percent), bankcards (3 percent vs. 4.3 percent) and retail (even at 2.7 percent). For those Boomerang Buyers who had foreclosed, the numbers are also strong. More than 12 percent have boomeranged, with just 3 percent delinquent on their mortgage. They also match or are below national average delinquency rates on auto loans (1.9 percent) and bankcards (4.1 percent), and have a slightly higher delinquency rate for retail (3.5 percent). Due to their positive credit behaviors, Boomerang Buyers also have higher VantageScore® credit scores than before. On average, the overall non-boomerang group’s credit score sunk during a foreclosure but went up 10 percent higher than before the foreclosure, and Boomerang Buyers rose by nearly 14 percent. For people who previously had a prime credit score, their number dropped by nearly 5 percent, while those who boomeranged returned to the score they had prior to the foreclosure. By comparison, the overall non-boomerang and boomerang group saw their credit score drop during a short sale and increase more than 11 percent from before the short sale. For people who previously had prime credit, they dropped 2 percent while those who boomeranged were almost flat to where they were before the short sale. Another part of the equation is the stabilized housing market and relatively low loan-to-value (LTV) limits that lenders have maintained. In the past, borrowers most often strategically defaulted on their mortgages when their LTV ratios were well over 100 percent. So as long as lenders maintain relatively low LTV limits and the housing market remains strong, strategic default is unlikely to re-emerge as a risk.

A recent national survey by Experian revealed opportunities for businesses to build relationships with future homebuyers before they’re ready to obtain a loan. Insights include: 35% of future buyers said they don’t know what steps to take to qualify for a larger loan 75% of future buyers are not preapproved for a home loan 29% of those surveyed would purchase a more expensive home if they had better credit and could qualify for a larger loan A large portion of near-future homebuyers are millennials. Building relationships with this generation now will benefit financial institutions in the future. >> White paper: Building lasting relationships with millennials

More home buyers and sellers tend to enter the market in the warmer months, making spring and summer a busy season for mortgage brokers and lenders seeking to close deals and work through the mounds of paperwork associated with a home purchase. In April, the number of existing homes sold shot up 4.9 percent year-over-year, to 471,000 purchases across the United States, according to a recent report from the National Association of Realtors®. And sales were up 11.9 percent in April from March. With the belief that mortgage rates will finally start to climb in the coming months, fence-sitters will likely make a move this summer in order to capitalize on attractive rates, creating a healthy home-buying season. On average, it takes 45 days to close a home loan, and anyone going through that process will admit the process can cause stress, anxiety and uncertainty. In fact, a recent study ranked buying a home as the No. 1 most stressful experiences in modern life with 69 percent calling it “stressful.” There are so many tollgates along the journey. Will the consumer qualify for a mortgage? Will the home appraise at the right price? Does the home pass inspection? Are there contingencies that can suddenly halt the sale? Will the seller or buyer get cold feet and send weeks of work down the drain? Of course there are many factors people can’t control as they seek to land their next home, but there are ways both the consumer and lender can work together to smooth out the process and endure the average 45-day closing period. Getting pre-approved for a home loan is obviously the ideal, with consumers understanding their credit score, existing financial obligations and the type of loan they can qualify for, as well as money required at closing. Increasingly, borrowers know the impact credit can have on their home-buying experience. A 2016 Experian study revealed: 93 percent of consumers reported “one’s credit score is important in purchasing a home” 48 percent stated “they are working to improve their credit to qualify for a better home rate” 34 percent of future first-time buyers say “their credit might hurt their ability to purchase a home” In this competitive market, low fees and interest rates drive consumers’ business. However, credit circumstances such as high debt-to-income ratios, too many open trades, or high balances may inhibit lenders or mortgage brokers from offering favorable terms, or even approving a loan altogether. In these scenarios, consumers may qualify for better loan terms simply by paying down debt. Lenders or brokers can assist their customer in rapidly refreshing, re-scoring, or correcting information on their credit report in one to two business days. This step can obviously help consumers, but also benefit lenders by retaining credit applicants before they pursue competitive offerings. Occasionally errors may pop up on a consumer’s credit report – an outdated trade line or inaccuracy – which can also impact the home-buying process. Consumers have the ability to file a dispute with the credit bureaus or their lender directly, and those disputes must be addressed within 30 days. However, if a loan process is already underway, mortgage brokers and lenders can help expedite the process by using a product like Experian’s Express Request™ to facilitate dispute resolution in 48 hours. Quickly addressing an inaccuracy benefits the home buyer, but also the lender who is likely working to close a number of loans during the busy spring and summer months. Without a doubt, the documentation process surrounding a home purchase is intense, but if all parties come to the table quickly with the requested items and verification, the process can be smoother. And then the stress can turn to scheduling moving vans and packing …

HELOC originations continued to benefit from the real-estate recovery and consumer desire to tap into available equity. According to the latest Experian–Oliver Wyman Market Intelligence Report, HELOC originations totaled $37.7 billion during Q1 2016 — an increase of 14% over Q1 2015. As HELOC originations continue their growth trend, lenders can stay ahead of the competition by using advanced analytics to target the right customers and increase profitability. Revamp Mortgage Acquisition Strategies

According to the latest Experian-Oliver Wyman Market Intelligence Report, mortgage originations for Q2 2015 increased 56% over Q2 2014 — $547 billion versus $350 billion.

As the summer home buying season kicks into high gear, a newly released survey shows the importance of understanding credit scores and their impact on homebuyer behavior.