Vision 2014: Mortgage and Millenials a New Frontier

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Millennial borrowers are the next purchase market opportunity, as the mortgage market shifts from refinancing to purchase money. How do we get them? What credit products do they need? How do we engage them? What process is relevant to them? From the servicing end, how do we balance regulatory requirements with the needs of the Millennial customer?

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Vision 2014: Mortgage and Millenials a New Frontier

  1. 1. ©2014 Experian Information Solutions, Inc. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian. Experian Public. Mortgage and Millennials and how to target them Marnie Applegate PNC Michelle McLellan Bank of America #vision2014 John Carroll Experian Crissy Wallace Experian
  2. 2. 2©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. The Millennials Why they matter and the impact they have on the mortgage market
  3. 3. 3©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Generational review Greatest / Silent 1927 – 1945 Age: 69-87 Baby Boomers 1946 – 1964 Age: 50-68 Gen X / Busters 1965 – 1983 Age: 31-49 Gen Y / Millennial 1984 – 2002 Age: 12-30 Gen Z / Digital >2003 Age: <12
  4. 4. 4©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Millennials demographics Education X 8% 23% 38% 20% 12% 0% 8% 23% 50% 12% 6% 1% Less Than High School Diploma High School Diploma Some College Bachelor Degree Graduate Degree Unknown Gen X Gen Y Education level Y
  5. 5. 5©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. X Household income Y Millennials demographics Income 27% 43% 29% 46% 39% 16% <$50,000 $50,000-$99,999 $100,000+ Gen X Gen Y
  6. 6. 6©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 12% Families in Motion 14% Promising Families 27% Singles and Starters Experian Millennials Mosaic® segments Digital Dependents Singles who live digital-driven, urban lifestyles 7% Pastoral Pride
  7. 7. 7©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Millennials identification The Millennials: Confident. Connected. Open to Change. Generations, like people, have personalities, and Millennials – the American teens and twenty-somethings currently making the passage into adulthood – have begun to forge theirs: confident, self- expressive, liberal, upbeat and receptive to new ideas and ways of living. — pewsocialtrends.org
  8. 8. 8©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Millennials and mortgage
  9. 9. 9©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Unemployment impacts Riding through the various economic cycles 4.6 4.0 5.2 8.8 11.3 11.5 10.7 9.4 7.9 0 2 4 6 8 10 12 14 2005: Pre-Recession 2006: Inception 2007 2008 2009: Height 2010 2011: Pre-Recovery 2012 2013:: Recovery Pre-Recession: Young Millennials: 3-5 yrs. old & Oldest Millennials: 21-23 yrs. old During Recession: Young Millennials: 5-9 yrs. old & Oldest Millennials: 23-27 yrs. old
  10. 10. 10©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Unemployment rate for key MSAs 0 2 4 6 8 10 12 14 2005 2006 2007 2008 2009 2010 2011 2012 2013 Annualunemploymentrate Los Angeles Chicago Miami Dallas Austin Percent Change 2005-2013 Los Angeles Chicago Miami Dallas Austin 72% 60% 71% 15% 10%
  11. 11. 11©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Millennials age breakout Millennials 2006-2013 Generation X 2006-2013 19-22 years old <19 years old 23+ years old
  12. 12. 12©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Examining the period of impact 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 After Jan 2013 Pre-recession Bubble RecoveryHeight Pre-recovery Timeframe reviewed: 2005-2013 Pre- Recession Recovery Prior to Jan 2006 Jan 2006 – Dec 2008 Jan 2009 – Dec 2010 Jan 2011 – Dec 2012 During Recession
  13. 13. 13©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Key MSAs Millennial concentration Where are they? Age breakout 18*–24 35%25–30 65% * Only >= 18 due to credit profile HighLow 0.77%0.25%
  14. 14. 14©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Millennials credit health Mortgage debt Debt to income Mortgage performance
  15. 15. 15©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Indebtedness comparison nationwide Average current debt balances by generation As of Dec 2013 +27% +19% +58% $2,179 $1,899 $6,352 $2,669 $18,063 $14,663 $32,351 $23,563 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 Generation X Millennials Retail Bankcard Auto Student Loan 13% 58% 19% 27% $210,107 $151,758 $- $50,000 $100,000 $150,000 $200,000 Gen X Millennials Mortgage Only 28%
  16. 16. 16©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Indebtedness comparison nationwide (non-mortgage) Average balances by recessionary period $- $10,000 $20,000 $30,000 Retail Bankcard Auto Student Loan Generation X PreRecession Bubble Height PreRecovery Recovery 84%+ 27%+ 71%+13%+ $- $10,000 $20,000 $30,000 Retail Bankcard Auto Student Loan Millennials 136% + 59%+ 24%+ 211% +
  17. 17. 17©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Indebtedness comparison – mortgage only Average balance by recessionary period $169,022 $204,984 $210,107 $145,982 $142,868 $151,758 $100,000 $150,000 $200,000 PreRecession Recession Recovery Gen X Mortgage Millennials Mortgage 30% 28% 14%
  18. 18. 18©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Experian ability to pay models  Models developed with verified income data that included wages, investments, alimony, rents, etc.  Income InsightSM outputs dollar amount of total income rounded to nearest thousand ranging from $15,000 to $990,000  Income Insight W2SM outputs dollar amount of wage income rounded to nearest thousand ranging from $1,000 to $990,000 Income InsightSM  Offered as an add-on to Income InsightSM  Debt-to-Income InsightSM provides total debt  Debt-to-Income Insight W2SM provides individual debt  Premier AttributesSM available for calculation – total monthly payment: ► All debt ► First mortgage debt ► All mortgage debt  This specific research: Monthly payment DTIs Debt-to-Income InsightSM
  19. 19. 19©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Income Insight W2SM score Average Income by generation $40 $30 $45 $46 $47 $23 $19 $26 $28 $30 $- $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 PreRecession Bubble Height PreRecovery Recovery AnnualIncome(Thousands) Generation X Millennial 43% 36% AVG AGE 31 33 35 37 39 17 19 21 23 25
  20. 20. 20©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Debt-to-income comparison Average monthly payment to income ratios 10 10 8 8 8 10 11 9 9 9 30 31 28 26 25 35 39 35 32 31 0 20 40 60 PreRecession Bubble Height PreRecovery Recovery DTIScore–Monthlypayment/income Gen X DTI (less mortgage) Millennials DTI (less mortgage) Gen X DTI Millennials DTI
  21. 21. 21©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Predicts risk of borrower ► Likelihood of future serious delinquencies (90 days late or greater) ► Any type of account  24-month performance  Score range of 300-850 ► Higher scores represent a lower likelihood of risk ► Lower scores are higher risk VantageScore® 3.0 Model overview A = Super-prime 781-850 B = Prime 661-780 C =Near Prime 601-660 D = Sub-prime 500-600 F = Deep Sub-prime 300-499
  22. 22. 22©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Average VantageScore® 3.0 comparison Generation X vs. Millennial 634 634 636 640 643 619 611 612 614 617 400 500 600 700 PreRecession Bubble Height PreRecovery Recovery VantageScore®3.0 Recessionary timeframe Generation X Millennial
  23. 23. 23©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Average VantageScore® MSA comparison Each by recessionary period 606 617 627 629 635 600 603 618 623 628 608 607 622 628 633 500 600 700 800 Dallas Miami Austin Los Angeles Chicago Millennials Scores also on the uptick, recovering little slower 618 630 638 644 650 627 624 647 642 652 637 630 657 650 659 500 600 700 800 Dallas Miami Austin Los Angeles Chicago Generation X PreRecession Recession Recovery Scores on the uptick
  24. 24. 24©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 27% 31% 31% 2% 4% 7% 0% 10% 20% 30% PreRecession Recession Recovery Average percent of consumers with mortgage trade on file Generation X Millennials Mortgages comparison nationwide By recessionary timeframe Up 126% Up 67%
  25. 25. 25©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Mortgages comparison by MSA Average percent of consumer with first mortgage trades 21% 21% 31% 35% 34% 0% 10% 20% 30% 40% Los Angeles Miami Dallas Austin Chicago Generation X PreRecession Height Recovery 3% 3% 6% 7% 6% 0% 10% Los Angeles Miami Dallas Austin Chicago Millennials
  26. 26. 26©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Credit performance – ever 60DPD By recessionary period 12% 22% 26% 15% 17% 13% 0% 25% PreRecession Recession Recovery Number of consumers with first mortgage trade 60DPD Generation X Millennial
  27. 27. 27©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Millennials current view Average mortgage debt: $151K Average DTI: 9% monthly, 31% including mortgage Average mortgage performance: 13% 60DPD ever Data as of Dec 2013
  28. 28. 28©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Millennial targeting Marnie Applegate PNC Michelle McLellan Bank of America
  29. 29. 29©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. How to attract the RIGHT Millennial population
  30. 30. 30©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. For additional information, please contact: John.Carroll@experian.com Crissy.Wallace@experian.com Hear the latest from Vision 2014 in the Daily Roundup: www.experian.com/vision/blog @ExperianVision | #vision2014 Follow us on Twitter
  31. 31. 31©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Visit the Experian Expert Bar to learn more about the topics and products covered in this presentation.

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