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An analysis of trends shows that mortgage originations have increased by 10 percent from a year ago. More important, a look at the most recent completed quarter shows a 29 percent increase in home purchases from the prior quarter and a decrease in the number of refinances, suggesting a sustained recovery is beginning to come from purchases. These findings and others were part of the quarterly analysis from Experian that examines real-estate trends. The key statistic in the real-estate market is the change in the ratios of refinances versus home purchases, with purchases making up a much greater proportion of the total origination volume. The data from Experian’s IntelliView product indicates that despite a 7 percent decrease from the previous quarter in refinancing activity, home purchases grew by 20 percent year over year and 29 percent quarter over quarter, and this is where we can begin to see some of the real-estate recovery taking place.” The analysis of existing and new home sales also points to the turnaround in the real-estate market. The data shows a reduction in sales of distressed homes and an increase in conventional sales. Since last year, the sales of distressed properties from short sales and foreclosures have been reduced from 25 percent to just 15 percent, while conventional existing home sales grew by 32 percent year over year, nearly double the overall growth rate of existing home sales. Combine this with strong growth year over year from new home sales at 38 percent, and it is easy to see that the recovery could be coming from purchases. Looking at the top metropolitan areas in terms of price appreciation and origination volume, Las Vegas, Nev.; Phoenix, Ariz.; and Atlanta, Ga., were three cities ranked in the top five for both categories. They were followed by Miami and Tampa, Fla., both in the top five for originations but not for prices, even though they had respectable double-digit price percentage increases. San Francisco and Los Angeles, Calif., also saw top-five price gains, but they were not in the top five for originations, despite their strong performance. This indicates that the areas showing the greatest recovery are those that were hardest hit during the downturn, such as Florida, Nevada, Arizona and California. Further evidence of the improving real-estate market is the significant jump in home-equity lines of credit (HELOC) in the second quarter of FY 2013 — the first major jump of this kind since the recession. Growing slowly but consistently since 2010, it increased about 10 percent last year but exploded this quarter with a more than 30 percent increase in the quarter and year over year. This data demonstrates an improved position for many consumers who now have equity in their homes due to market price increases. We continue to see a very conservative lending approach, with nearly 90 percent of HELOCs still coming from super-prime and prime consumers. However, there is an opportunity for more people to actually participate in getting a home-equity line because of home price improvements. This trend is likely to continue as we see more homeowners move into a better equity position. The West, Midwest, South Central, South Atlantic and Northeast regions of the United States all have shown strong year-over-year growth in HELOCs, with the West being the standout among the group. This is attributed to the price appreciation coming from cities like San Francisco, Los Angeles, Phoenix and Las Vegas. The Northeast also consistently leads in HELOCs nationwide regardless of how the real-estate market is performing in that area of the country. A look at mortgage delinquencies is the final piece of the data puzzle supporting a real-estate recovery. In this area, Experian® continues to see a downward trend across all the different time segments. The analysis showed that short-term delinquencies — 30 to 59 days past due (DPD) — dropped to 1.51 percent for the quarter and have been less than 2 percent for more than a year and a half. Midrange delinquencies — 60 to 89 DPD — saw a very slight 1 percent increase for the quarter, but they have been less than 1 percent for more than a year and a half as well. Long-term delinquencies — 90 to 180 DPD — were down 1.32 percent for the quarter. This impressive downward trend is the result of bad loans from the first real-estate bubble being removed and replaced with postrecession conservative lending. The data for this insight and analysis was provided by Experian’s IntelliViewSM product. IntelliView data is sourced from the information that supports the Experian–Oliver Wyman Market Intelligence Reports and is easily accessed through an intuitive, online graphical user interface, which enables financial professionals to extract key findings from the data and integrate them into their business strategies. This unique data asset does this by delivering market intelligence on consumer credit behavior within specific lending categories and geographic regions.
An Experian analysis of bankcard trends from Q2 2013 showed a 21 percent year-over-year increase in bankcard origination volumes, equating to $12 billion increase in new bankcard limits issued. Other insights offered by Experian, the leading global information services company, include record lows in early-stage bankcard delinquencies. Bankcard originations continue to track with the recovery in terms of steady growth. While we may never hit the volumes we saw in 2007, the consistent growth rates that we are currently seeing in bankcard originations signal that the market is coming back online. In looking at bankcard originations by VantageScore®, the year-over-year growth in originations has largely been driven by the prime and near-prime segments, comprising almost the entire $12 billion increase in new credit limit dollars originated. This trend points to the fact that prime and near-prime consumers are accepting the offers being extended to them and that lenders are continuing to lend a little deeper to drive bankcard growth. Equally important is that prime and near-prime bankcard utilization rates are not as high as they were a year ago. This is a positive trend, because it shows that despite an increase in new bankcard users, consumers are managing their credit wisely. The analysis of bankcard delinquency and overall risk exposure also continues to support the steady recovery of the bankcard market. Charge-off rates are significantly down, to an annualized rate of 3.9 percent, with early-stage delinquencies coming in at historic lows of 0.9 percent of balances for the quarter. Additionally, total risk exposure has dropped $3 billion from the previous quarter in 2013. These trends are a positive sign for overall economic recovery and evidence that the post-recession growth in the bankcard market is not coming at the expense of increased delinquencies. The data for this insight and analysis was provided by Experian's IntelliView (SM) product. IntelliView data is sourced from the information that supports the Experian-Oliver Wyman Market Intelligence Reports and is easily accessed through an intuitive, online graphical user interface, which enables financial professionals to extract key findings from the data and integrate them into their business strategies. This unique data asset does this by delivering market intelligence on consumer credit behavior within specific lending categories and geographic regions.
As you may have seen, 60 Minutes ran a story on the credit reporting industry tonight, and unfortunately, much of the story was inaccurate and misleading. As we said when it first aired, many parts of the story did not accurately reflect the facts that have been validated by independent third party studies, the industry’s position or Experian’s position. As such, we would like to clarify our industry position and specific allegations about Experian’s practices. >> Read More
Today, we stand at the forefront of a digital revolution that is reshaping the financial services industry. And, against this backdrop, financial institutions are at vastly different levels of maturity; the world’s biggest banks are managing large-scale infrastructure migrations and making significant investments in AI while regional banks and credit unions are putting plans in place for modernization strategies, and fintechs are purpose-built and cloud native. To explore this more, I recently had the privilege of attending the annual Reuters NEXT live event in New York City. The event gathers globally recognized leaders across business, finance, technology, and government to tackle some of today’s most pressing issues. On the World Stage, I joined Del Irani, a talented anchor and broadcast journalist, to discuss the future of lending and the pivotal role of data and AI in building a more inclusive financial system. Improving financial access Our discussion highlighted the lack of access to traditional financial systems, and the impact it has on nearly 100 million people in North America alone. Globally, the problem affects over one billion people. These people, who are credit invisible, unscoreable, or have subprime credit scores, are unable to secure everyday financial products that many of us take for granted. What many don’t realize is, this is not a fringe subset of the population. Most of us, myself included, know someone who has faced the challenges of financial exclusion. Everyday Americans, including young people who are just starting out, new immigrants and people from diverse communities, often lack access to mainstream financial products. We discussed how traditional lending has a limited view of a consumer. Like looking through a keyhole, the lender’s understanding of the person in view is often incomplete and obstructed. However, with expanded data, technology, and advanced analytics, there is an opportunity to better understand the whole person, and as a result have a more inclusive financial system. At Experian, we have a unique ability to connect the power of traditional credit with alternative data, bringing a more holistic understanding of consumers and their behaviors. We are dedicated to leveraging our rich history in data and our expertise in technology to create the future of credit and ultimately bring financial power to everyone. The future of lending After spending two days with over 700 industry leaders from around the world, one thing is abundantly clear: much like the early days of the internet, today, we are at the cutting-edge of a technical revolution. Reflecting on my time at Reuters NEXT, I am particularly excited by the collective commitment to drive innovative, and smarter ways of working. We are only beginning to scratch the surface of how data and technology can transform financial services, and Experian is positioned to play a significant role. As we look to the future, I am excited about the ways we will create new opportunities for businesses and consumers alike.
We believe that financial literacy leads to empowerment. That is why Experian supports initiatives and partners with community organizations to deliver financial education. We also develop products and services that give more control to consumers over their credit profile and financial health. As part of advancing our mission of Financial Power to All®, we are proud to announce we are helping more than 5,000 Hispanic individuals nationwide by relieving $10 million dollars of consumer debt. To provide families with this boost, we joined forces with ForgiveCo, a Public Benefit Corporation (PBC), to administer the acquisition and cancellation of qualifying consumer debt for the selected recipients. Beneficiaries will also receive a one-year premium Experian membership for free that offers access to their Experian credit report in English and Spanish[i], FICO® Score[ii], bilingual educational content, and other financial resources. We hope this effort helps raise awareness of the importance of financial literacy for everyone, and that Experian has resources to help individuals reach their financial dreams. To amplify the message, we collaborated with multi-platinum, award-winning singer and songwriter Prince Royce and you can see his video here. In fact, we have been making a concerted effort the last several years to evolve our educational resources and products to better support all underserved communities. Some of our other activities include the creation of the B.A.L.L. for Life initiative that connects African American and Hispanic youth with financial education, supporting scholarships for Asian Americans through the Ascend organization, providing custom resources for Out & Equal and Born This Way Foundation for the LGBTQ+ community, supporting the NextGen Innovation Lab for Disability:IN, and sponsoring credit counseling for the military community with Operation HOPE. For resources in Spanish, Experian offers a credit e-book and consumers can access a full suite of articles at the Ask Experian blog here. [i] Only Experian credit reports are available in Spanish. All other services associated with an Experian membership are available in English only. English fluency is required for full access to Experian’s products. [ii] Credit score calculated based on FICO® Score 8 model. Your lender or insurer may use a different FICO® Score than FICO® Score 8, or another type of credit score altogether. Learn more.
Amid some of the financial challenges that underserved communities experience, members across the financial services community remain committed to championing initiatives and programs that drive greater financial inclusion. In fact, collaboration has led to the inclusion of non-debt related payment information on consumers’ credit profiles, as well as digital services that make it easier to manage money. These efforts have helped to broaden access to fair and affordable financial resources for more individuals. While significant progress has been made, there is still more work to do. However, some of the misconceptions and myths about the financial services community are hindering further advancement. Debunking these myths will accelerate progress by building trust between the financial services community and consumers. Person withdrawing money from ATM contactless Myth #1: “Financial institutions have no interest in underserved consumers or credit invisibles.” The truth is, banks and credit unions want to say “yes” to more prospective borrowers, including individuals and families from underserved communities. Beyond being the right thing to do, it’s an opportunity to potentially build lifelong relationships with a relatively untapped market. A show of good faith to communities who have largely been ignored by the financial system could lead to customer loyalty that may extend to their family and friends. That’s why participants across the financial ecosystem have been proponents of including expanded data sources—such as on-time telecom, utility and video streaming service payments—on to consumer credit reports, as well as exploring other Fair Credit Reporting Act (FCRA)-regulated data sources, including payment data on short-term small dollar loans and expanded public records data. Making this data more accessible to lenders provides a more comprehensive view of a consumer’s ability and willingness to repay outstanding debt—an actionable solution to extending credit to consumers without lenders taking on additional risk. Myth #2: “There is a lack of trustworthy financial education resources.” The financial services community and affiliated organizations recognize that empowering people with financial knowledge and skillset are critical to consumers’ financial success. In fact, banks and credit unions are partnering with nonprofits and non-governmental organizations to better understand the unique challenges and opportunities within specific communities and provide relevant tools and resources. For example, Experian’s B.A.L.L. for Life (Be A Legacy Leader) program, launched in partnership with the National Urban League, serves as a catalyst for engaging with Black communities and low-income youth through live events and digital financial education. Subject matter experts, professional athletes, celebrities, and other influencers share their experiences and expertise, covering topics such as banking, credit, financial management and investing. In addition, to help people improve their financial management, Experian partners with the National Foundation for Credit Counseling (NFCC). The NFCC connects consumers with certified financial counselors to help them address various pain points, including debt management, homeownership, student loans or small business cash flow issues. Myth #3: “Underserved communities have few opportunities to build credit and enter the mainstream financial system.” People from underserved communities, as well as younger consumers and recent immigrants are often excluded from the mainstream financial system because they lack an extensive credit history. Historically, it’s created a vicious cycle; in order to get credit, you have to have credit. Fortunately, there has been a sea change in innovative solutions to address the specific needs of these populations. These include new credit scoring models and microfinancing which provide financial services to individuals who may have been excluded from traditional banking systems. In addition, by incorporating expanded data sources, such as telecom, utility and residential rental payments onto credit reports, lenders have more visibility into consumers who may have been excluded by traditional credit scoring methods.These programs help individuals and families from underserved communities establish and build a credit history that could enable loans, or the ability to rent an apartment or open their dream business. An example is Experian Boost®, a free feature that allows Experian members to contribute their history of making utility, cellphone, insurance, residential rent and video streaming service payments directly into their Experian credit profile. By incorporating nontraditional credit data like paying utility bills on time, online banking transactions, rental payments and verified income data, more people can establish a credit profile that can potentially qualify them for a loan. More Inclusion, Fewer Myths It’s encouraging that community organizations and banks are beginning to see the economic and social benefits of aligning on financial literacy and inclusion. As more initiatives come online, underserved populations will be able to establish a better financial foundation. Then, we can declare the myths to be history.