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

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

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We surveyed consumers to learn about their views toward home ownership, how recent changes in
the mortgage industry impacted their application experience, what factors are most important in the
mortgage application process, and if consumers would be willing to consider an alternate mortgage
provider.

• 80% of U.S. consumers would consider a mortgage from a non-bank
• 1 in 3 consumers would consider a mortgage from Walmart
• 48% would consider a mortgage from PayPal

Although, consumer satisfaction with primary banks ranked high (81%) the study reveals continued
frustrations with current mortgage processes that could drive consumers to alternative home loan
providers:

• High interest rates, high payments, and taxes and escrow are the top three most frustrating
issues regarding consumers’ current mortgages
• 56% of consumers blame slow execution as one of the most painful aspects of the mortgage
process
• 32% said difficult to communicate with
• 31% said unable to track the status of their mortgage application
• 26% said untrustworthy advice

“Consumer attitude is driven by three things, price, service and trust,” said Doug Hautop, Senior
Manager and Lending Practice lead for CG. “Institutions looking to gain market share must target
customer values instead of traditional asset segmentation.”

We surveyed consumers to learn about their views toward home ownership, how recent changes in
the mortgage industry impacted their application experience, what factors are most important in the
mortgage application process, and if consumers would be willing to consider an alternate mortgage
provider.

• 80% of U.S. consumers would consider a mortgage from a non-bank
• 1 in 3 consumers would consider a mortgage from Walmart
• 48% would consider a mortgage from PayPal

Although, consumer satisfaction with primary banks ranked high (81%) the study reveals continued
frustrations with current mortgage processes that could drive consumers to alternative home loan
providers:

• High interest rates, high payments, and taxes and escrow are the top three most frustrating
issues regarding consumers’ current mortgages
• 56% of consumers blame slow execution as one of the most painful aspects of the mortgage
process
• 32% said difficult to communicate with
• 31% said unable to track the status of their mortgage application
• 26% said untrustworthy advice

“Consumer attitude is driven by three things, price, service and trust,” said Doug Hautop, Senior
Manager and Lending Practice lead for CG. “Institutions looking to gain market share must target
customer values instead of traditional asset segmentation.”

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

  1. 1. 1 in 3 Would Consider a Walmart Mortgage 80% of U.S. Consumers Would Consider a Non-bank Mortgage INSPIRED TO HELP YOU SUCCEED www.carlisleandgallagher.com @InspiredByCG
  2. 2. Introduction Key Questions 1. What is the current view toward home ownership? 2. How have recent changes in the mortgage industry impacted the application experience?  Homeowner confidence is high – half of U.S. homeowners expect their home to grow and deliver significant value 3. What factors are most important in the mortgage process?  One-third of consumers would consider a mortgage from Walmart  There are distinct profiles of 4. Would customers be willing to consider a non-bank for their next mortgage? mortgage buyers  Primary banks are missing 31% of share with captive customers 2 INSPIRED TO HELP YOU SUCCEED 5. What do primary banks need to do to add market share? © 2012 Carlisle & Gallagher Consulting Group. Proprietary and Confidential.
  3. 3. Survey Snapshot Household Income Age Distribution Overall mix of respondents reflects a higher income base METHODOLOGY Even distribution of respondents across age segments 13% 38% All respondents live in the U.S. • The survey was conducted online 18-34 Less than $49,999 35-50 33% $50,000 to $99,999 46% 618 survey responses • 3% • 32% Over 50 • Participants were $100,000 to $249,999 recruited from an online research panel $250,000 or more • Participants were required to be over 18 years of age • Last Applied for Mortgage There were no specific requirements to be on the panel • 35% The study targeted 50% of respondents to have household income over $100K and no more than 25% below $50K 52% of respondents have purchased a new house or refinanced their home since 2010 Before 2010 24% 48% 2010-2011 2012 3 INSPIRED TO HELP YOU SUCCEED 28% © 2012 Carlisle & Gallagher Consulting Group. Proprietary and Confidential.
  4. 4. Home Ownership Confidence is High Expected Financial Return on Home 44% 4% 6% Don’t know 46% Decline over time Flat growth and maintain value Grow significantly over time Q12: Which of the following best describes your expected financial return on your home?  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 4 INSPIRED TO HELP YOU SUCCEED © 2012 Carlisle & Gallagher Consulting Group. Proprietary and Confidential.
  5. 5. Home Ownership is Still an Important Investment View of Home Ownership 53% 43% 4% Decline over time A key component, but not most important investment Most important investment This trend is most significant for family incomes below $100K Q12B: Which of the following best describes your view of home ownership? TAKE AWAY Homeowner appeal remains strong 5 INSPIRED TO HELP YOU SUCCEED © 2012 Carlisle & Gallagher Consulting Group. Proprietary and Confidential.
  6. 6. The Pipeline for Home Buying is Shifting Towards Home Purchases  Mortgage originations are ($B) forecasted to contract in 2013 2011 2012 2013 2011-2013 CAGR – Refinance volume will decrease from 68% of total originations to just 40% Total Originations 1262 1466 1043 -9.1% Purchase 404 406 631 25.0% – Purchase volume is forecasted to increase Refinance 858 1060 412 -30.7% Refinance % Share 68% 72% 40% – Overall, total originations is forecasted to decrease Source: MBA Mortgage Finance, September 18, 2012 Timing for Families Who Plan to Buy A Home  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 37% Expect to buy a Expect to buy a new home in the new home in the next 10 years next 10 years Within the next 12 months 16% 1-3 years More than 3 years An efficient purchase process will be critical in order to be competitive, including refocusing key resources back to fulfillment. INSPIRED TO HELP YOU SUCCEED 44% Q11: When do you expect to purchase a new home? TAKE AWAY 6 40% © 2012 Carlisle & Gallagher Consulting Group. Proprietary and Confidential.
  7. 7. Primary Banks Remain in a Strong Position Overall with Their Customers  Respondents have a strong satisfaction Satisfaction with Primary Bank levels with their primary bank  The majority believe that they are 4% preferred customers  25% of respondents look to a specific High 14% person at the bank for guidance and assistance Moderate  Technology, security, and location rank at the top of the list 81%  Customer service and cost rank lower Low Satisfaction with Primary Bank Features 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 Q39: What is your degree of satisfaction with you primary bank? (High= 4 or 5, Moderate=3, Low = 1or 2. 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 Q34: For your primary bank, please rate your level of satisfaction with each of the following (1- no satisfaction at all, 5- highest satisfaction 7 INSPIRED TO HELP YOU SUCCEED © 2012 Carlisle & Gallagher Consulting Group. Proprietary and Confidential.
  8. 8. Selection Criteria is Complicated Most Important Factors in the Mortgage Selection & Application Process Cost Low cost 84% Trust in financial institution 46% Trust in mortgage advisor/salesperson Trust Treated as a unique customer 42% 15% Time-to-close 46% Understand application process 43% Simplicity of completing application Customer Service 42% Communication of application status 34% Simplicity of product Range of product Education 19% 15% 11% #1 Factors in the Mortgage Application Process Cost 16% Q39: Which of the following factors are most important in the mortgage application process? Choose up to five. Trust 23% TAKE AWAY 61% Despite the importance of cost, there are many factors that influence the mortgage selection process 8 INSPIRED TO HELP YOU SUCCEED © 2012 Carlisle & Gallagher Consulting Group. Proprietary and Confidential. Customer Service
  9. 9. Customer Service Rises to be a Painful Aspect of the Mortgage Application Process Most Important Painful Factors in the Mortgage Application Process Cost High cost 66% 26% Untrustworthy advice Lack of trust in institution Trust Not treated as unique customer 21% 11% Slow execution 56% Difficult to communicate with Difficult to communicate with 32% Unable to track application status Customer Service 31% Difficulting completing application requirements 28% Complexity of products 27% Limited product options No credit counseling 12% 4% Q41: Which of the following factors are considered to be the most painful aspects in the mortgage application process? Choose up to five. 77% respondents believe that regulatory changes will have a worse or no impact on the mortgage process  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 9 INSPIRED TO HELP YOU SUCCEED © 2012 Carlisle & Gallagher Consulting Group. Proprietary and Confidential. of
  10. 10. Primary Banks are Missing their Fair Share of the Mortgage Market Mortgage Segments for Primary Banks 70% Unattainable 30% Current Mortgage Customers of respondents would prefer to have their mortgage with one of their main banks 39%  39% of respondents have a mortgage with their primary bank 31% Missed  This represents significant opportunities for banks to gain market share with their current customer base Opportunity Q53: Would you prefer to have you mortgage with one of your major banks? TAKE AWAY Despite strengths in areas such as checking and credit cards, a large share of customers look to alternatives for their mortgage needs 10 INSPIRED TO HELP YOU SUCCEED © 2012 Carlisle & Gallagher Consulting Group. Proprietary and Confidential.
  11. 11. Consumers Placing Trust in Non-Banks 80% of Survey Respondents Consider Non-bank Mortgages 20% 80% Yes No Institutions looking to gain market share must target customer values instead of traditional asset segmentation. INSPIRED TO HELP YOU SUCCEED mortgage from Walmart Nearly half (48%) of consumers TAKE AWAY 11 1 in 3 consumers would consider a would consider a mortgage from PayPal © 2012 Carlisle & Gallagher Consulting Group. Proprietary and Confidential.
  12. 12. 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 12 INSPIRED TO HELP YOU SUCCEED © 2012 Carlisle & Gallagher Consulting Group. Proprietary and Confidential.
  13. 13. Study Finds One-third of Consumers Would Consider a Mortgage from Walmart Tom Mataconis | VP of Consulting Doug Hautop | Lending Practice Leader Thomas.Mataconis@cgcginc.com Doug.Hautop@cgcginc.com 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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