Equity lenders who are trying to get a read on potential for the remainder of 2014 should be encouraged by recent economic data. Despite the headwinds of higher interest rates and a geographically uneven recovery, current trends suggest a continuation of the upswing experienced throughout 2012 and 2013.

1. MARKETING SERVICES
Everything’s Coming upEquity:
Why You Should Lend NOW
By Douglas Roman, Senior Strategist, Harland Clarke

2. New and Existing Home Sales
(in thousands)
7,000
4,000
Q4
2013
Q2
2015
Q1
2015
Q4
2014
Q3
2014
Q2
2014
Q1
2014
5,000
5,378
5,437
5,517
5,876
5,926
5,990
6,052
6,000
Source: Mortgage Bankers Association, Mortgage Finance Forecast, February 2014
Equity lenders who are trying to get a read on
potential for the remainder of 2014 should be
encouraged by recent economic data. Despite
the headwinds of higher interest rates and a
geographically uneven recovery, current
trends suggest a continuation of the upswing
experienced throughout 2012 and 2013.
There are upward trends in new home sales, existing home sales
and median home prices, all of which could bode well for home
equity lending in 2014.
According to the Mortgage Bankers Association (MBA), new
and existing home sales for the fourth quarter of 2013 rose to
almost 5.4 million homes on an annualized basis, up significantly
from 4.8 million in the fourth quarter of 2012. The MBA also
forecasts the quarterly figures for 2014 to be in a tight range
from 5.7 million to 5.9 million units. They project strong
mortgage loan demand into 2015.1
Upward trends in
new home sales,
existing home sales
and median home
prices bode well
for 2014 home
equity lending.
1
Mortgage Bankers Association, Mortgage Finance Forecast, March 2012- February 2014
2

3. S&P Case-Shiller 20-City Home Price Index (SPCS20RSA)
220
200
180
160
140
120
100
80
2000 2002 2004 2006 2008 2010 2012 2014
Source: S&P Dow Jones Indices LLC
Shaded areas indicate U.S. recessions.
(IndexJanuary2000=100)
Rising Home Values Rejuvenating Loan Growth
The S&P Case-Shiller 20-City Home Price Index hit 165.80 for its
January 28, 2014 reporting date. The index is well below the 200+
peak it reached in 2006, but a far cry from the sub-140 reading
registered in early 2012. After recording a 13 percent year-over-year
gain for 2013, the index is expected to gain another six percent in
2014, according to Erkan Erturk, S&P Structured Finance research
analyst. Higher mortgage rates will significantly reduce refinance
activity, but Erturk expects moderate growth in mortgage
originations for home purchases.2
2
Standard & Poors, CreditMatters TV, January 14, 2014
Projections by MBA and Zillow Real Estate Research, outlined
in the next chart, show a slow but steady rise in home prices
throughout 2014.
3

4. Median Home Prices
(in thousands)
$400
$350
$300
$250
$250.2
$178.8
$269.1
$205.8
$270.2
$193.7
$276.0
$198.1
$282.0
$202.4
$283.1
$207.5
$279.4
$201.3$200
$150
$100
$50
$0
Q4
2012
Q4
2014
Q3
2014
Q2
2014
Q1
2014
Q4
2013
Q3
2013
Source: Mortgage Bankers Association Source: Zillow, Real Estate Research, August 2013
Existing Home Prices New Home Prices
Rising home values, of course, create more home equity against which
to borrow. More than 62% of homeowners now have Loan-to-Value
ratios under 80 percent, increasing the potential market for home
equity products.3
While the recovery has been uneven, there are pockets where home
prices are going up. In fact, homeowner equity has risen $3.4 trillion
or 55 percent since late 2011.4
This rise in home values provides a good foundation for homeowners
to be able to tap into the equity in their homes.
Increasing Home Equity Opens the Door for Improvements
After the 2008 recession, many homeowners were frustrated by their
inability to finance home improvements. When real estate values
dropped in 2007-2008, a good number saw their mortgages exceed
their home values. Others had such little home equity that they
weren’t able to borrow against it. They had needs, but they didn’t have
the equity to finance those needs. Now, with home prices going up,
there are consumers who will be able to borrow again.
3
Zillow, Negative Equity Report, Q4 2013
4
U.S. Department of Housing and Urban Development/U.S. Department of the Treasury,
The Obama Administration’s Efforts to Stabilize the Housing Market and Help American Homeowners, December 2013
4

5. Leading Indicator of Remodeling Activity — Fourth Quarter 2013
$200
-0.4%
$111.6 $111.4
$114.7
$119.4
$120.9
$121.5
$123.1
$126.8 $126.0 $127.0 $128.7
$139.9
$140.4
$144.7
$147.6
$153.8
-1.5%
0.3%
6.3%
8.4%
9.0%
7.4%
6.2%
4.2% 4.5% 4.5%
10.4%
11.4%
14.0%
14.7%
9.9%
$100
$110
$120
$130
$140
$150
$160
$170
$180
25%
-20%
-19%
-10%
-5%
0%
5%
10%
15%
20%$190
2011-1 2012-1 2013-1 2014-14 2 3 4 2 3 4 2 3 4 2 3
Source: Joint Center for Housing Studies of Harvard University.
Note: Third quarter 2013 estimate does not include Census Bureau data, because third quarter data collection for home improvement spending was affected by the October 2013 government shutdown.
LIRAUS Census Bureau
Homeowner Improvements Four-Quarter Moving Totals Billions of $ Four-Quarter Moving Rate of Change
There are other residual effects of the recession playing a part in
equity lending. The recession has had a long-term effect on the
psyche of the consumer. Instead of moving up to bigger and better
houses, some consumers decided to remain in their current homes.
These individuals may not be ready for significantly higher mortgage
payments, but they see home values appreciating and may decide
to make home improvements.
Harvard University’s Leading Indicator of Remodeling Activity (LIRA)
provides an outlook on homeowner remodeling activity and identifies
turning points in the home improvement industry’s business cycles.
According to recent data, remodeling spending is slated to increase
in the first and second quarters of 2014. While the rate of change is
expected to decline in third quarter 2014, it would still be higher than
at the same time in 2013. So, it appears that homeowners are feeling
somewhat more confident about the value of their homes and are
willing to borrow to make additional improvements to increase
that value.
5

6. Homeowners Like the Flexibility of Equity Credit Lines
Once homeowners decide to renovate, they look for ways to finance
their home improvements. Consumers are looking to leverage their
increasing home values through equity financing. A home equity line
of credit is the most common, convenient way to do that. Since 2009,
revolving home equity loans have been originated at a rate of roughly
$500 billion to $600 billion per year.5
The beauty of the
home equity line of
credit is its flexibility.
Real Estate Loans: Revolving Home Equity Loans, All Commercial Banks
(SPCS20RSA)
700
600
500
400
300
200
100
0
1985 1990 1995 2000 2005 2010 2015
Source: Board of Governors of the Federal Reserve System
Shaded areas indicate U.S. recessions.
(BillionsofUSDollars)
The beauty of the line of credit is the flexibility it provides.
The account holder gets a line of credit based on the equity
in the home, which they can draw against in varying amounts.
Typically, it’s at a variable rate of interest that fluctuates with
prime. Financial institutions can offer a fixed rate on a portion
of the credit line. So, for example, a $20,000 credit line might
have a $5,000 fixed rate component – offering a level of
flexibility to the lender as well.
A credit line also provides the account holder with a source of
credit that can be used as needed.They appreciate the flexibility
6
5
Federal Reserve, Real Estate Loans: Revolving Home Equity Loans, All Commercial Banks, 2014

7. of keeping the line open for a period of time. So do financial
institutions. Unlike mortgages, for which financial institutions
are challenged to retain the account holder once the loan is
repaid, home equity lines of credit can be refinanced when it’s
time for repayment – thereby extending the banking relationship.
Rising home values — and consumer interest in further increasing
those values — offer a timely opportunity for financial institutions
to grow their equity lending portfolios. If you are interested in
identifying and targeting account holders who are in the market
for equity loans, call 1.800.351.3843,
visit harlandclarke.com/insight/LoanAcquisition
or ContactUs@harlandclarke.com
Douglas Roman is a Senior Strategist specializing in Financial Services marketing
at Harland Clarke. In this role, Douglas compiles and analyzes research to develop
strategic, data-driven, multi-channel client marketing programs. He has more than
18 years of combined direct response marketing experience in Retail Banking, Credit
Card and Wireless Communications. Prior to joining Harland Clarke, Douglas was a
Vice President at Wachovia/Wells Fargo, where he led the Direct Marketing unit
that supported the bank’s various retail lines of business including deposits,
consumer lending, electronic banking, debit and credit card, small business
and investments services.
© 2014 Harland Clarke Corp.
MKSVC-0690-01
Home equity lines
of credit can extend
the banking relationship
once the mortgage
loan is repaid.