U.S. Consumers Consider Non-bank Home Mortgages from Walmart and PayPal | Carlisle & Gallagher Consulting Group

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1 in 3 Would Consider a Walmart Mortgage80% of U.S. Consumers Would Consider a Non-bank Mortgage

© 2012 Carlisle & Gallagher Consulting Group. Proprietary and Confidential. INSPIRED TO HELP YOU SUCCEED2

Introduction

Homeowner confidence is high –

half of U.S. homeowners expect their home to grow and deliver significant value

One-third of consumers would consider a mortgage from Walmart

There are distinct profiles of mortgage buyers

Primary banks are missing 31% of share with captive customers

Key Questions

1. What is the current view toward home ownership?

2. How have recent changes in themortgage industry impacted the application experience?

3. What factors are most important in the mortgage process?

4. Would customers be willing to consider a non-bank for their next mortgage?

5. What do primary banks need to do to add market share?


Survey Snapshot

Even distribution of respondents across age segments

52% of respondents have purchased a new house or refinanced their home since 2010

Age DistributionHousehold Income

Last Applied for Mortgage

METHODOLOGY

• 618 survey responses

• All respondents live in the U.S.

• The survey was conducted online

• Participants were recruited from an online research panel

• There were no specific requirements to be on the panel

• Participants were required to be over 18 years of age

• The study targeted 50% of respondents to have household income over $100K and no more than 25% below $50K

13%

38%46%

3%Less than $49,999

$50,000 to $99,999

$100,000 to $249,999

$250,000 or more

32%

35%

33%

18-34

35-50

Over 50

2012

2010-2011

Before 2010

28%

48%

24%

Overall mix of respondents reflects a higher income base


Home Ownership Confidence is High

46% of respondents expect their home values to grow significantly over time

Only 4% expect housing values to decline over time.

Only 40% of respondents over 50 expect home values to grow significantly

The 35-50 age category are the most optimistic

6% 4%

44% 46%

Grow significantly over time

Flat growth and maintain value

Decline over time

Don’t know

Expected Financial Return on Home

Q12: Which of the following best describes your expected financial return on your home?


Home Ownership is Still an Important Investment

TAKE AWAY

Homeowner appeal remains strong

This trend is most significant for family incomes below $100K

4%

43%53%

A key component, but not most

important investment

Decline over time

View of Home Ownership

Most important investment

Q12B: Which of the following best describes your view of home ownership?


The Pipeline for Home Buying is Shifting Towards Home Purchases

Mortgage originations are forecasted to contract in 2013

– Refinance volume will decrease from 68% of total originations to just 40%

– Purchase volume is forecasted to increase

– Overall, total originations is forecasted to decrease

($B) 2011 2012 2013 2011-2013 CAGR

Total Originations 1262 1466 1043 -9.1%

Purchase 404 406 631 25.0%

Refinance 858 1060 412 -30.7%

Refinance % Share 68% 72% 40%

Source: MBA Mortgage Finance, September 18, 2012

Expect to buy a new home in the next 10 years

TAKE AWAY

An efficient purchase process will be critical in order to be competitive, including refocusing key resources back to fulfillment.

According to CG’s survey, in the next ten years:

– 57% of homeowners between the ages of 18 and 34 plan to buy a new home

– Only 25% of homeowners over 50 plan to purchase a new home

More than 3 years

1-3 years

Within the next 12 months

44%

40%

16%

Q11: When do you expect to purchase a new home?

Timing for Families Who Plan to Buy A Home

37%Expect to buy a new home in the next 10 years


Primary Banks Remain in a Strong Position Overall with Their Customers

Respondents have a strong satisfaction levels with their primary bank

The majority believe that they are preferred customers

25% of respondents look to a specific person at the bank for guidance and assistance

Technology, security, and location rank at the top of the list

Customer service and cost rank lower81%

14%

4%

High Moderate

Low

Satisfaction with Primary Bank

TAKE AWAY

Overall satisfaction and priorities suggest that primary banks are in a strong position to hold a large share of mortgages with their clients

Q39: What is your degree of satisfaction with you primary bank? (High= 4 or 5, Moderate=3, Low = 1or 2.

RESPONSE MEAN

Technology for online banking 4.24

Security of my assets 4.20

Location 4.18

Customer service 4.03

Brand 3.95

Cost 3.88

Products and services 3.82

Satisfaction with Primary Bank Features

Q34: For your primary bank, please rate your level of satisfaction with each of the following (1- no satisfaction at all, 5- highest satisfaction


Education

Range of product

Simplicity of product

Communication of application status

Simplicity of completing application

Understand application process

Time-to-close

Treated as a unique customer

Trust in mortgage advisor/salesperson

Trust in financial institution

Low cost

11%

15%

19%

34%

42%

43%

46%

15%

42%

46%

84%

Selection Criteria is Complicated

Q39: Which of the following factors are most important in the mortgage application process? Choose up to five.

TAKE AWAY

Despite the importance of cost, there are many factors that influence the mortgage selection process

#1 Factors in the Mortgage Application Process

Most Important Factors in the Mortgage Selection & Application Process

61%23%

16% Cost

Trust

Customer Service

Cost

Trust

CustomerService

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Customer Service Rises to be a Painful Aspect of the Mortgage Application Process

No credit counseling

Limited product options

Complexity of products

Difficulting completing application requirements

Unable to track application status

Difficult to communicate with

Slow execution

Not treated as unique customer

Lack of trust in institution

4%

12%

27%

28%

31%

32%

56%

11%

21%

26%

66%High cost

Q41: Which of the following factors are considered to be the most painful aspects in the mortgage application process? Choose up to five.

Untrustworthy advice

Untrustworthy advice rises to the top in the trust segment

While the speed of execution remains the top service concern, lack of communication rises to be #2 issue

In terms of top pain area, service increases from 16% as a top area of importance to 35% as the most painful aspect of the mortgage application process

Most Important Painful Factors in the Mortgage Application Process

Cost

Trust

Difficult to communicate with

CustomerService 77% of

respondents believe that regulatory changes will have a worse or no impact on the mortgage process


Primary Banks are Missing their Fair Share of the Mortgage Market

TAKE AWAY

Despite strengths in areas such as checking and credit cards, a large share of customers look to alternatives for their mortgage needs

39%

31%

30%

Mortgage Segments for Primary Banks

Q53: Would you prefer to have you mortgage with one of your major banks?

Current Mortgage Customers

Unattainable

Missed Opportunity

39% of respondents have a mortgage with their primary bank

This represents significant opportunities for banks to gain market share with their current customer base

70% of

respondents would prefer to have their mortgage with one of their main banks


Consumers Placing Trust in Non-Banks

80%

20%

YesNo

1 in 3 consumers would consider a mortgage from Walmart

Nearly half (48%) of consumers would consider a mortgage from PayPal

80% of Survey Respondents Consider Non-bank Mortgages

TAKE AWAY

Institutions looking to gain market share must target customer values instead of traditional asset

segmentation.


Summary: Banks Must Align to Customer Values to Win Mortgage Market Share

Here are three strategies to gain share in the new normal:

1. Leverage the Investment in Regulatory Response to Address the Voice of the Customer

2. Focus on Cost, Trust and Service as Defined by Customer Value to Match Your Target Market

3. Capitalize on Market Share Opportunities for Primary Banking Customers

H

Study Finds One-third of Consumers Would Consider a Mortgage from Walmart

Tom Mataconis | VP of Consulting Doug Hautop | Lending Practice Leader

[email protected] [email protected]

704.936.1610 704.936.1600

Carlisle & Gallagher Consulting Group

212 South Tryon Street, Suite 800, Charlotte, NC 28281

www.carlisleandgallagher.com

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U.S. Consumers Consider Non-bank Home Mortgages from Walmart and PayPal | Carlisle & Gallagher Consulting Group