Report Description

Post Crisis Changes in Mortgage Lending in U.S. – Analysis & Forecast

The U.S. has the world’s largest mortgage market; in 2009 the country had an outstanding mortgage-to-GDP ratio - above 100% - despite being very badly affected by the recent financial crisis. The report ‘Post Crisis Changes in Mortgage Lending in the U.S. – Analysis & Forecast, 2010-2015’ is a market research study of recent changes in the U.S. residential mortgage industry. The report has five chapters – Market Overview, Forecast & Analysis, Strategy Formulation, Case Studies, and Vendor Analysis.

‘Market Overview’ focuses on post crisis changes in the U.S. residential mortgage industry. It identifies top players and their market shares according to mortgage origination as well as servicing volume. Overall, the chapter contains the gist of recent changes or developments related to the industry.

The second chapter, ‘Analysis & Forecast’, contains estimates for residential mortgage originations till 2010. To forecast origination, this report recognizes thethree most important demand side factors and three most important supply side factors. The demand side factors include GDP, unemployment, and saving rate as a percentage of disposable income; and the supply side factors include inflation, mortgage rate, and new home starts.

The ‘Strategy Formulation’ chapter features strategies followed by top players in the U.S. as well as by some offshore players in Australia, Bahrain, Hong Kong, the U.K. and other markets.

The ‘Case Studies’ section discusses the impact of technology on mortgage lenders’ productivity. We have reviewed the role of mortgage technologies in improving the efficiency of lenders.

‘Vendor Analysis’ includes profiles of the top eight technology providers. To identify these, the first top 50 vendors were selected based on certain criteria. The top 50 vendors were analyzed on the basis of their developments to enhance products and services after January 2009; the top eight were then selected from these. The chapter also benchmarks profiled vendors

EXECUTIVE SUMMARY 10
1 INTRODUCTION 13
1.1 REPORT PURPOSE 13
1.1.1 REPORT CATALYST 13
1.1.2 REPORT STRUCTURE 13
1.2 RESEARCH OBJECTIVE 14
1.3 STUDY METHODOLOGY 14

2 MARKET OVERVIEW 16
2.1 INTRODUCTION 16
2.2 POST CRISIS MORTGAGE SCENARIO 20
2.2.1 FEAR OF FORECLOSURE LEADS TO REFINANCING 20
2.2.2 COSTLY FHA CREATES OPPORTUNITY FOR PRIVATE MORTGAGE INSURANCE 21
2.2.3 BANKS UNDER PRESSURE TO REPURCHASE MBS 22
2.2.4 BANKS PREFER REVERSE MORTGAGE 23
2.2.5 MARKET CONSOLIDATION 23
2.2.5.1 Mortgage – A Consolidating Market 24
2.2.5.2 Residential Mortgage Lending – Top Lenders 25
2.3 GOVERNMENT REVAMPS THE MORTGAGE INDUSTRY 26
2.3.1 MHA (MAKING HOME AFFORDABLE) PROGRAM 26
2.3.2 FEDERAL RESERVE’S MBS PURCHASE PROGRAM 27
2.3.3 TAX CREDITS TO BOOST HOME SALES 28

3 ANALYSIS AND FORECAST 30
3.1 INTRODUCTION 30
3.2 ANALYSIS OF DEMAND SIDE INDICATORS 30
3.2.1 NOMINAL GDP TO GROW OVER 3% BY 2015 30
3.2.2 HIGHEST UNEMPLOYMENT RATE SINCE 1984 31
3.2.3 SAVINGS RATE REDUCES FROM THE 2009 HIGH 34
3.3 ANALYSIS OF SUPPLY SIDE INDICATORS 35
3.3.1 REDUCING CORE INFLATION 35
3.3.2 MORTGAGE RATES AT THEIR LOWEST 37
3.3.3 HOUSING STARTS TO GROW FROM 2010 39
3.4 MORTGAGE ORIGINATION TO INCREASE AFTER 2011 40
3.4.1 MORTGAGE ORIGINATION WILL GROW AT 10% CAGR 42
3.4.2 FROM REFINANCE TO NEW PURCHASES 43

4 STRATEGY FORMULATION 44
4.1 INTRODUCTION 44
4.2 STRATEGIES ADOPTED BY U.S. BANKS 44
4.2.1 ACQUIRING TROUBLED LENDERS FOR EXPANSION 44
4.2.2 EFFORTS TO REDUCE DEFAULT RATES 50
4.2.3 EFFORTS TO CREATE AWARENESS & BRAND BUILDING 52
4.2.4 UPGRADING TECHNOLOGY 54
4.3 EARLY MOVERS WILL EXPLOIT OPPORTUNITIES IN NEAR-FUTURE 55
4.4 STRATEGIES FOLLOWED BY BANKS IN FOREIGN MARKETS 56
4.4.1 PRODUCT BUNDLING STRATEGY EFFECTIVELY ADOPTED BY AUSTRALIAN BANKS TO BUILD CUSTOMER LOYALTY 56
4.4.2 ARAB BANK’S INITIATIVE IN BAHRAIN HELPS REDUCE BURDEN OF REPAYMENT THROUGH LINKED ACCOUNTS 56
4.4.3 LLOYDS TSB ALLOWED ITS U.K. BORROWERS TO USE THIRD PARTY CONTRIBUTIONS FOR HOME PURCHASES 57
4.4.4 U.K. BASED GUARANTORS’ MORTGAGE PROGRAMS TO BOOST LENDING 57
4.4.5 IRELAND BASED BANK PROTECTS HOME OWNERS FROM FALLING HOUSE PRICES 58
4.4.6 SUCCESS OF REPAYMENT OPTIONS DEPEND ON FLEXIBILE TERMS 58
4.4.6.1 Multiple Repayment Options by Standard Chartered Bank 59
4.4.6.2 New Zealand based TSB Bank’s flexible repayment options 59
4.4.7 HYBRID HOME LOANS IN NEW ZEALAND, CANADA AND THE U.K. GIVE THE ADVANTAGE OF FIXED AS WELL AS VARIABLE RATES 60

5 CASE STUDIES 61
5.1 CASE STUDY I – COMMUNITY BANK OF PENNSYLVANIA INCREASED LOAN VOLUME AND STREAMLINED MORTGAGE PROCESS WITH INTEGRATED POINT OF SALE SOLUTION BY MORTGAGEBOT 61
5.1.1 ABOUT COMMUNITY BANK 61
5.1.2 OBJECTIVES 62
5.1.2.1 Manual data entry paper dependency and inefficiency – main bottlenecks faced by the bank 62
5.1.2.2 Challenge – Increase efficiency and productivity 63
5.1.2.3 Bank selects Mortgagebot’s PowerSite mortgage POS 63
5.1.2.4 More channels, higher volume and more productivity were the main benefits 64
5.1.3 CONCLUSION 65
5.2 CASE STUDY II – MORTGAGE BUILDER SOFTWARE IMPLEMENTS END-TO-END SAAS LOAN ORIGINATION PLATFORM AT CORTLAND BANK 66
5.2.1 ABOUT CORTLAND SAVINGS AND BANKING COMPANY 66
5.2.2 OBJECTIVES 66
5.2.2.1 Challenge of cost and time in implementing an enterprise level LOS 66
5.2.2.2 SaaS model offered by Mortgage Builder solved the bank’s requirement 67
5.2.3 CONCLUSION 67

6 VENDOR ANALYSIS 68
6.1 VENDOR BENCHMARKING 68
6.1.1 STRATEGIC BENCHMARKING 69
6.1.2 FUNCTIONAL BENCHMARKING 71
6.2 VENDOR PROFILES 73
6.2.1 DEL MAR DATATRAC 73
6.2.1.1 Products and services 73
6.2.1.2 Developments 74
6.2.2 ELLIE MAE 76
6.2.2.1 Products and services 76
6.2.2.2 Developments 77
6.2.3 ISGN 79
6.2.3.1 Products and services 79
6.2.3.2 Developments 80
6.2.4 MORTGAGE BUILDER SOFTWARE 82
6.2.4.1 Products and services 82
6.2.4.2 Developments 83
6.2.5 MORTGAGE CADENCE 84
6.2.5.1 Products and services 84
6.2.5.2 Developments 85
6.2.6 MORTGAGEBOT 86
6.2.6.1 Products and services 86
6.2.6.2 Developments 87
6.2.7 MOTIVITY SOLUTIONS 89
6.2.7.1 Products and services 89
6.2.7.2 Developments 90
6.2.8 MRG DOCUMENT TECHNOLOGIES 92
6.2.8.1 Products and services 92
6.2.8.2 Developments 93

LIST OF TABLES

TABLE 1 LIST OF ACQUISITIONS AND BENEFITS TO ACQUIRERS 45
TABLE 2 LENDERS EFFORT TO REDUCE DELINQUENCIES 51