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Loans & Mortgages 2017

Americans Managing Increasing Debt Better Than Expected

• According to the Federal Reserve Bank of New York, household debt totaled $12.58 trillion at the end of Q4 2016, which was a 1.8% increase from Q3 2016 and a 3.8% increase from the end of Q4 2015, when the total was $12.12 trillion.

• The $12.58 trillion total is just $99 billion less than the peak of Q3 2008 (the highest since Q1 2004); and the end of 2008 was the beginning of the financial crisis and the resulting Recession.

• All 4 primary loan types – mortgage, auto, credit card and student – increased during Q4 2016; however, bankruptcies and foreclosures were at their lowest levels during the past 18 years, indicating that consumers are able to manage this debt load.

Consumer Credit Outstanding, 2015–2016

|Metric |2015 |2016 |% Change |

|Total percent change (annual rate) |+7.0% |+6.4% |-8.6% |

| Revolving |+5.2% |+6.1% |+17.3% |

| Non-revolving |+7.7% |+6.5% |-15.6% |

|Total flow (annual rate) |$232.7 B |$227.6 B |-2.2% |

| Revolving |$46.4 B |$57.6 B |+24.1% |

| Non-revolving |$186.4 B |$169.6 B |-9.0% |

|Total outstanding |$3.5357 T |$3.7629 T |+6.4% |

| Revolving |$937.9 B |$995.5 B |+6.1% |

| Non-revolving |$2.5979 T |$2.7674 T |+6.5% |

US Federal Reserve System, February 2017

Paper Holders’ Numbers

• Among the various financial institutions, mortgage companies, finance companies and credit card companies holding the paper on all these loans and mortgages, the total amount outstanding decreased -0.1% from the end of Q3 2015 to the end of Q3 2016.

• Outstanding receivables on real estate were almost totally responsible for the decrease, with a total of $106.3 billion outstanding at the end of Q3 2016, an 18.4% decrease.

• Outstanding receivables on business loans decreased a slight 0.1% at the end of Q3 2016, to $414.7 billion, at an annual rate, and 2.6% less than the total outstanding at the end of Q3 2015, or $426.3 billion.

All Finance Companies: Receivables Outstanding Totals, 2015–2016

|Metric |Q3 2015 |Q4 2015 |Q1 2016 |Q2 2016 |Q3 2016 |

|Consumer |$906.6 B |$903.4 B |$905.4 B |$904.4 B |$909.3 B |

|Real Estate |$126.1 B |$119.5 B |$115.9 B |$111.4 B |$106.3 B |

|Business |$426.3 B |$425.1 B |$414.6 B |$414.8 B |$414.7 B |

|Total |$1.4590 T |$1.4480 T |$1.4359 T |$1.4306 T |$1.4303 T |

US Federal Reserve System, January 2017

Housing and Mortgage Market

• According to data from the US Consumer Financial Protection Bureau, 898,355 new mortgage loans were originated during November 2016, or a 69.65% Y-O-Y increase, with a total value of $214.7 billion, or a 33.57% Y-O-Y increase.

• As of the end of Q4 2016, the mortgage delinquency rate for loans, or those at least one payment past due, but not in foreclosure, was 4.8%, which was 28 basis points more than the end of Q3 2016, and just 3 basis points more than the end of Q4 2015.

• During January 2017, single-family housing starts increased 6.2%, compared to January 2016, and the 30-year fixed mortgage rate was 4.15%, as of February 16, 2017, compared to 3.65% during the same week of February 2016.

Mortgage Volumes and Values, by Age Groups, 2015–2016

|Metric |Younger than 30 |30–44 |45–64 |65 and Older |

|Total mortgage value: Nov. 2016 |$17.99 B |$99.03 B |$94.20 B |$22.29 B |

|Total mortgage value: Nov. 2015 |$11.53 B |$54.81 B |$54.91 B |$12.04 B |

|Percent change |+56.03% |+80.68% |+71.55% |+85.13% |

|Total mortgage originations: Nov. 2016 Y-O-Y change |+59.54% |+85.74% |+90.98% |+99.64% |

US Consumer Financial Protection Bureau, January 2017

Huge Household Formations Forecast

• The Mortgage Bankers Association forecasts an additional 15.9 million households in the US by 2024. Households of Americans 60+ will increase 12.9 million and those 45 years of age and younger, 5.1 million; while those 45–59 will decrease 2.1 million.

• If the 2024 home ownership rate is the same as 2014, which is below the long-term average, then there will be 10.3 million more homeowner households; however, if the rate is the same as the long-term average, then there will be 12.7 million.

• At the long-term home ownership average, there will be 16% more homeowners by 2024, with 7.3 million additional minority owner households and 5.4 million non-Hispanic Caucasian American owner households.

Projected Change in Number of Households, by Age and Ethnicity, 2014–2024

|Age Range |Caucasian Americans |African Americans |Hispanic Americans |Asian Americans |Other |Total |

|18–29 |-504,784 |-25,001 |+595,872 |+115,311 |+209,328 |+390,727 |

|30–39 |+1,217,641 |+708,246 |+978,419 |+391,609 |+245,631 |+3,541,544 |

|40–49 |-685,499 |+6,699 |+1,020,461 |+400,412 |+118,672 |+860,743 |

|50–59 |-3,139,398 |-88,800 |+1,021,066 |+328,917 |+16,323 |-1,834,889 |

|60–69 |+2,126,031 |+814,470 |+1,129,214 |+292,817 |+134,754 |+4,497,286 |

|70+ |+5,962,109 |+939,044 |+948,528 |+389,709 |+161,367 |+8,400,757 |

|Total |+4,976,101 |+2,534,656 |+5,720,561 |+1,918,774 |+886,074 |+15,856,166 |

Mortgage Bankers Association, July 2015

Auto Loans Increase with Sales Increase

• With light vehicle sales setting new records during each of the past few years (and on-target to do the same for 2017), the outstanding amount for all motor vehicle loans reached $1.112 trillion at the end of 2016, a 7.1% increase from 2015.

• This has created some concern in the auto loan market because when more cars are purchased more consumers with subprime credit scores receive loans, which in turn has increased the severe delinquency rate from 1.24% during 2015 to 1.35% for 2016.

• Three of the primary auto lenders – banks, credit unions and captive lenders – typically lend to consumers with credit scores of 620+. The other three – independent, monoline auto and dealer finance companies – lend to consumers with subprime credit scores.

Auto Loan Lending Levels, by Credit-Score Segments, 2015–2016

|Credit-Score Segment |Recent Peak in Value |Y-O-Y Change* |

|Deep subprime (less than 580) |$4.1 B (March 2015) |-8.66% |

|Subprime (580–619) |$4.0 B (March 2015) |-8.45% |

|Near-prime (620–659) |$6.0 B (August 2015) |+2.37% |

|Prime (660–719) |$10.8 B (August 2016) |+2.94% |

|Super-prime (720+) |$24.3 B (August 2016) |+9.07% |

US Consumer Financial Protection Bureau, January 2017 *November 2015 to November 2016

Student Loans: Borrowing to Learn

• According to the Federal Reserve Bank of New York’s Q4 2016 report on household debt and credit, student loan debt increased $78 billion from Q4 2015 to Q4 2016, to a total of $1.31 trillion, which is the 18th consecutive year of increases.

• Of the five primary debt categories in the report, student loans had the highest seriously delinquent rate, or at least 90 days past due, at 11.2%, compared to 3.3% for all five categories, and well ahead of the second-highest category, credit cards, at 7.1%.

• As might be expected, August is the month when student-loan originations peak, but interestingly, during August 2016, students, 30–44, had the highest origination value, or $3.78 billion, while the total value for students younger than 30 was $2.78 billion.

Complaints Against Top-Four Servicers of Federal Student Loans

Per 100,000 Borrowers, January–December 2016

|Servicer |Complaints |Borrowers |Complaints Per 100,000|

| | | |Borrowers |

|Navient |1,317 |6,740,000 |19.54 |

|PHEAA (FedLoan & AES) |907 |8,350,000 |10.86 |

|Not-for-profit servicers |209 |3,160,000 |6.61 |

|Neinet |406 |6,240,000 |6.51 |

|Great Lakes |255 |8,260,000 |3.09 |

Credit Union Times (US Consumer Financial Protection Bureau), February 2017

Additional Analysis

Based on information from the National Association of Home Builders (NAHB), people’s desire to buy a home may have less to do with a home’s affordability, although the Q4 2016 affordability index for new and existing homes was 59.9%, the lowest since Q3 2008.

The actual drivers of this lower affordability index are shortages of buildable lots and skilled labor, excessive regulations, rising mortgage interest rates and continuous home price appreciation. According to the NAHB, the national median home price increased $3,000 to $250,000 during Q4 2016, while the average mortgage rate increased to 3.84% (but was 4.25% for most conventional 30-year fixed mortgages at the end of the week of February 13, 2017).

Youngstown-Warren-Boardman, OH-PA was the most affordable major US housing market and Fairbanks, AL continued to be the most affordable smaller market. San Francisco-Redwood City-South South San Francisco, CA had the dubious distinction as the least affordable major US housing market – and for the 17th consecutive quarter.

Credit Card Fees’ Change Comparisons, Q1–Q4 2016

|Fee Type |Q1 2016 |Q2 2016 |Q3 2016 |Q4 2016 |Q4 vs. Q3 Change |

| |(vs. last year) |(vs. last year) |(vs. last year) |(vs. last year) | |

|Average annual fee |$16.81 |$16.43 |$16.42 |$16.78 |+2.19% |

| |(-2.27%) |(-6.33%) |(-5.85%) |(+1.64%) | |

|Average maximum late fee |$35.34 |$35.49 |$35.46 |$35.50 |+0.11% |

| |(+2.08%) |(+0.62%) |(-0.42%) |(-0.20%) | |

|Average foreign transaction fee |2.08% |2.05% |2.02% |1.97% |-2.48% |

| |(-9.57%) |(-6.82%) |(-6.91%) |(-7.51%) | |

|Foreign Transaction fee range |0%–3% |0%–3% |0%–3% |0%–3% |N/A |

|Average balance transfer fee for cards with intro |3.04% |3.09% |3.09% |3.04% |-1.62% |

|balance transfer APR |(+2.70%) |(+0.98%) |(+1.64%) |(0.00%) | |

WalletHub, January 2017

Sources: Federal Reserve Bank of New York Website, 2/17; CNBC Website, 2/17; The US Federal Reserve System Website, 2/17; US Consumer Financial Protection Bureau Website, 2/17; Mortgage Daily News Website, 2/17; Freddie Mac Website, 2/17; Mortgage Bankers Association Website, 2/17; Visual Capitalist Website, 2/17; Credit Union Times Website, 2/17; Eye on Housing (National Association of Home Builders) Website, 2/17; WalletHub Website, 2/17.

Updated: February 2017

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