Post Crisis Changes in Mortgage Lending in U.S.

TABLE OF CONTENTS

EXECUTIVE SUMMARY

1 INTRODUCTION
  1.1 REPORT PURPOSE
      1.1.1 REPORT CATALYST
      1.1.2 REPORT STRUCTURE
  1.2 RESEARCH OBJECTIVE
  1.3 STUDY METHODOLOGY

2 MARKET OVERVIEW
  2.1 INTRODUCTION
  2.2 POST CRISIS MORTGAGE SCENARIO
      2.2.1 FEAR OF FORECLOSURE LEADS TO REFINANCING
      2.2.2 COSTLY FHA CREATES OPPORTUNITY FOR PRIVATE MORTGAGE INSURANCE
      2.2.3 BANKS UNDER PRESSURE TO REPURCHASE MBS
      2.2.4 BANKS PREFER REVERSE MORTGAGE
      2.2.5 MARKET CONSOLIDATION
            2.2.5.1 Mortgage – A Consolidating Market
            2.2.5.2 Residential Mortgage Lending – Top Lenders
  2.3 GOVERNMENT REVAMPS THE MORTGAGE INDUSTRY
      2.3.1 MHA (MAKING HOME AFFORDABLE) PROGRAM
      2.3.2 FEDERAL RESERVE’S MBS PURCHASE PROGRAM
      2.3.3 TAX CREDITS TO BOOST HOME SALES

3 ANALYSIS AND FORECAST
  3.1 INTRODUCTION
  3.2 ANALYSIS OF DEMAND SIDE INDICATORS
      3.2.1 NOMINAL GDP TO GROW OVER 3% BY 2015
      3.2.2 HIGHEST UNEMPLOYMENT RATE SINCE 1984
      3.2.3 SAVINGS RATE REDUCES FROM THE 2009 HIGH
  3.3 ANALYSIS OF SUPPLY SIDE INDICATORS
      3.3.1 REDUCING CORE INFLATION
      3.3.2 MORTGAGE RATES AT THEIR LOWEST
      3.3.3 HOUSING STARTS TO GROW FROM 2010
  3.4 MORTGAGE ORIGINATION TO INCREASE AFTER 2011
      3.4.1 MORTGAGE ORIGINATION WILL GROW AT 10% CAGR
      3.4.2 FROM REFINANCE TO NEW PURCHASES

4 STRATEGY FORMULATION
  4.1 INTRODUCTION
  4.2 STRATEGIES ADOPTED BY U.S. BANKS
      4.2.1 ACQUIRING TROUBLED LENDERS FOR EXPANSION
      4.2.2 EFFORTS TO REDUCE DEFAULT RATES
      4.2.3 EFFORTS TO CREATE AWARENESS & BRAND BUILDING
      4.2.4 UPGRADING TECHNOLOGY
  4.3 EARLY MOVERS WILL EXPLOIT OPPORTUNITIES IN NEAR-FUTURE
  4.4 STRATEGIES FOLLOWED BY BANKS IN FOREIGN MARKETS
      4.4.1 PRODUCT BUNDLING STRATEGY EFFECTIVELY ADOPTED BY AUSTRALIAN BANKS TO BUILD CUSTOMER LOYALTY
      4.4.2 ARAB BANK’S INITIATIVE IN BAHRAIN HELPS REDUCE BURDEN OF REPAYMENT THROUGH LINKED ACCOUNTS
      4.4.3 LLOYDS TSB ALLOWED ITS U.K. BORROWERS TO USE THIRD PARTY CONTRIBUTIONS FOR HOME PURCHASES
      4.4.4 U.K. BASED GUARANTORS’ MORTGAGE PROGRAMS TO BOOST LENDING
      4.4.5 IRELAND BASED BANK PROTECTS HOME OWNERS FROM FALLING HOUSE PRICES
      4.4.6 SUCCESS OF REPAYMENT OPTIONS DEPEND ON FLEXIBILE TERMS
            4.4.6.1 Multiple Repayment Options by Standard Chartered Bank
            4.4.6.2 New Zealand based TSB Bank’s flexible repayment options
      4.4.7 HYBRID HOME LOANS IN NEW ZEALAND, CANADA AND THE U.K. GIVE THE ADVANTAGE OF FIXED AS WELL AS VARIABLE RATES

5 CASE STUDIES
  5.1 CASE STUDY I – COMMUNITY BANK OF PENNSYLVANIA INCREASED LOAN VOLUME AND STREAMLINED MORTGAGE PROCESS WITH INTEGRATED POINT OF SALE SOLUTION BY MORTGAGEBOT
      5.1.1 ABOUT COMMUNITY BANK
      5.1.2 OBJECTIVES
            5.1.2.1 Manual data entry paper dependency and inefficiency – main bottlenecks faced by the bank
            5.1.2.2 Challenge – Increase efficiency and productivity
            5.1.2.3 Bank selcts Mortgagebot’s PowerSite mortgage POS
            5.1.2.4 More channels, higher volume and more productivity were the main benefits
      5.1.3 CONCLUSION
  5.2 CASE STUDY II – MORTGAGE BUILDER SOFTWARE IMPLEMENTS END-TO-END SAAS LOAN ORIGINATION PLATFORM AT CORTLAND BANK
      5.2.1 ABOUT CORTLAND SAVINGS AND BANKING COMPANY
      5.2.2 OBJECTIVES
            5.2.2.1 Challenge of cost and time in implementing an enterprise level LOS
            5.2.2.2 SaaS model offered by Mortgage Builder solved the bank’s requirement
      5.2.3 CONCLUSION

6 VENDOR ANALYSIS
  6.1 VENDOR BENCHMARKING
      6.1.1 STRATEGIC BENCHMARKING
      6.1.2 FUNCTIONAL BENCHMARKING
  6.2 VENDOR PROFILES
      6.2.1 DEL MAR DATATRAC
            6.2.1.1 Products and services
            6.2.1.2 Developments
      6.2.2 ELLIE MAE
            6.2.2.1 Products and services
            6.2.2.2 Developments
      6.2.3 ISGN
            6.2.3.1 Products and services
            6.2.3.2 Developments
      6.2.4 MORTGAGE BUILDER SOFTWARE
            6.2.4.1 Products and services
            6.2.4.2 Developments
      6.2.5 MORTGAGE CADENCE
            6.2.5.1 Products and services
            6.2.5.2 Developments
      6.2.6 MORTGAGEBOT
            6.2.6.1 Products and services
            6.2.6.2 Developments
      6.2.7 MOTIVITY SOLUTIONS
            6.2.7.1 Products and services
            6.2.7.2 Developments
      6.2.8 MRG DOCUMENT TECHNOLOGIES
            6.2.8.1 Products and services
            6.2.8.2 Developments
 
LIST OF TABLES

TABLE 1 LIST OF ACQUISITIONS AND BENEFITS TO ACQUIRERS
TABLE 2 LENDERS EFFORT TO REDUCE DELINQUENCIES
 
LIST OF FIGURES

FIGURE 1 DEGREE OF CORRELATION BETWEEN RESIDENTIAL MORTGAGE ORIGINATION AND ITS DRIVERS
FIGURE 2 EXCESSIVE CONSUMPTION IN LINE WITH  OVERVALUED HOUSING
FIGURE 3 NATIONWIDE AVERAGE HOME PRICES (1987 – 2009)
FIGURE 4 TOTAL NUMBER OF VACANT HOMES: CONDOS AND SINGLE FAMILY
FIGURE 5 FORECLOSURES CONTINUE TO SOAR
FIGURE 6 TOTAL MORTGAGE REPURCHASES BY BANKS (2009)
FIGURE 7 COMBINED MARKET SHARE OF TOP FIVE LENDERS SINCE 2004
FIGURE 8 MARKET SHARE OF MORTGAGE LENDERS IN Q1–2010
FIGURE 9 SALES OF EXISTING SINGLE FAMILY HOMES
FIGURE 10 NUMBER OF HOUSES SOLD
FIGURE 11 U.S. GDP GROWTH IS BACK IN POSITIVE TERRITORY
FIGURE 12 UNEMPLOYMENT RATE IS AT ITS HIGHEST
FIGURE 13 NUMBER OF PEOPLE UNEMPLOYED AND DURATION OF UNEMPLOYMENT
FIGURE 14 PERSONAL SAVINGS RATE AT AN ALL TIME HIGH
FIGURE 15 CORRELATION OF INFLATION WITH HOME PRICE INDEX
FIGURE 16 MORTGAGE RATES IN LINE WITH TREASURY YIELDS
FIGURE 17 AVERAGE MORTGAGE RATES SHOW DOWNWARD TREND
FIGURE 18 TOTAL HOUSING STARTS (2005 – 2010)
FIGURE 19 PRIME AND SUB PRIME MORTGAGE ORIGINATIONS BY FICO SCORE
FIGURE 20 MORTGAGE ORIGINATION (2008 – 2015)
FIGURE 21 NEW MORTGAGE AND REFINANCE ORIGINATION (2004 – 2012)
FIGURE 22 ADVERTISEMENT THROUGH PRINT MEDIA
FIGURE 23 COMMON STRATEGIES ADOPTED BY VENDORS
FIGURE 24 STRATEGY ADOPTED BY VENDORS
FIGURE 25 PRODUCT LINE AND FUNCTIONALITY OFFERED BY VENDORS