Housing Finance Policy Center
Lunchtime Data Talk
Harnessing Credit Bureau Data for Research:
Boomerang Buyers and Strategic Defaulters
Ken Brevoort, Consumer Financial Protection Bureau
Michele Raneri, Experian
March 30, 2016
Harnessing Credit Bureau Data for
Research: Boomerang Buyers and
Strategic Defaulters
Michele Raneri
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Experian Confidential.
The credit bureau role supporting
the public and private sectors
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3
Historical credit data
Archives:

Monthly snapshots of entire credit file

10+ years of historical credit data

Depersonalized – no PII

Does not post an inquiry to consumer credit file

Persistent match keys enable longitudinal analysis
Data:
►
TIP: Trades, Inquiries, public records
►
Includes: account type, balance, limits, payment status
►
Premier Attributes: Aggregated consumer credit data
►
Credit Scores: VantageScore, FICO, custom scores
►
Models: Debt to Income (DTI), Asset Insight, Income Insight
►
Demographics: Non-FCRA data by consumer or geography
►
External sources: Property data, lists, application data
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Harnessing Credit Bureau Data for Research
Housing Finance Policy Center Data Talk
March 30, 2016
Using Credit Bureau Data to
Illuminate Mortgage Market Trends
Ken Brevoort
Section Chief, Credit Information & Policy
Office of Research
Consumer Financial Protection Bureau
The views expressed are those of the author and do not necessarily reflect those of the Consumer
Financial Protection Bureau or the United States.
Why Use Credit Bureau Data for Mortgage Research?
 Many alternatives exist for studying mortgages

Underwriting datasets (e.g., HMDA)

Servicing datasets (e.g., LPS, CoreLogic)

National Mortgage Database
• Based on Experian credit records
 Credit bureau data offer:



Near complete coverage of mortgage loans
Information on wide array of credit products (i.e., student loans, auto
loans)
Information on consumers without mortgages
• Potential first-time homebuyers
• Former homeowners
6
Part I.
First Time Homebuyers
7
Data
 Consumer Financial Protection Bureau’s Consumer
Credit Panel
 De-identified credit records on 5 million consumers

Data provided on a tradeline level

Similar information for co-borrowers
 Quarterly data from June 2004 – present

Also includes archives from 9/2001, 9/2002, 9/2003
8
First-time Homeowners, 2001 - 2007
9
First-time Homeowners, 2001 - 2007
10
First-time Homeowner Hazard Rates, 2001-2007
11
First-time Homeowners Hazard Rates, 2001-2007
12
First-time Homeowners Hazard Rate, 2001-2007
13
First-time Homeownership, 2001-2009
14
First-time Homeownership, 2001 - 2014
15
First-time Homeowner Hazard Rate, 2008 - 2014
16
First-time Homeowner Hazard Rate, 2008 – 2011
17
First-time Homeowner Hazard Rate, 2012-2014
18
First-time Homeowner Hazard Rate, 2012-2014
19
Estimated Hazard Rates
20
First-time Homeownership, 2001 - 2014
21
The “New Normal” for First-time Homebuyers?
22
The “New Normal” for First-time Homeowners?
23
Part II.
Foreclosure’s Wake
24
Data
 Federal Reserve Bank of New York/Equifax Consumer Credit Panel

Quarterly credit records starting in 1999Q1
 334,693 individuals whose mortgage entered foreclosure during
2000-2009
 Definitions:


“Foreclosure Start Quarter” – quarter in which mortgage enters
foreclosure
“Pre-delinquency Period” – quarter before foreclosure when record
last free of mortgage delinquency
25
Mean Credit Scores, Historical Cohorts
26
Mean Credit Scores, Recent Cohorts
27
A More Focused Definition
 A credit score “recovers” when it returns to its pre-delinquency
level
 Once a credit score returns to its pre-delinquency level, it is
assumed to remain recovered in all subsequent periods
28
Credit Score Recovery, Historical Cohorts
29
Credit Score Recovery, Recent Cohorts
30
Why Are Scores Persistently Low?
 Reason is unknown
 Cannot be directly attributed to foreclosure after 7 years
 Most likely candidate explanation is payment delinquency

Generally most important explanatory variables in credit bureau based
models
 Look at share of borrowers who are 90 days past due or worse
31
Delinquency Rate on All Credit,
Historical Cohorts
32
Delinquency Rate on All Credit,
Recent Cohorts
33
Credit Card Delinquency Rates
34
Auto Loan Delinquency Rates
35
Flawless Payment Sample
 Increase in delinquency may reflect gradual change where
borrowers just becoming delinquent more frequently
 Identify subset of the populations with a flawless payment history
before foreclosure


No evidence of missed payments more than 6 months before
foreclosure period
At least 3 years (12 quarters) of payments made
36
Delinquency for Flawless Payment Sample
37
Final Thoughts
•
Credit bureau data offer a source of high-quality and timely
information on consumer credit markets
•
Data can be used to
•
•
Monitor the functioning of major consumer credit markets
•
Better understand consumer behavior
•
Evaluate the effectiveness of new regulations or other developments
Though de-identified, data can be combined with information
from other sources while maintaining consumer anonymity
•
Used as a sampling frame for mail surveys
•
Combined with other administrative data
38
Boomerang buyer and fallen angels?
Boomerang Buyers
Mortgage borrowers who
had foreclosed or short sold
and have since opened a
subsequent mortgage
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Mortgage Market
Fallen Angels
Consumers who had
unexpected default during
the Great Recession and are
now recovering
39
Historical foreclosure rates
4.00%
Foreclose Rate (%)
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
Oct-15
Mar-15
Aug-14
Jan-14
Jun-13
Nov-12
Apr-12
Sep-11
Feb-11
Jul-10
Dec-09
May-09
Oct-08
Mar-08
Aug-07
Jan-07
Jun-06
Nov-05
Apr-05
Sep-04
Feb-04
Jul-03
Dec-02
May-02
Oct-01
Mar-01
Aug-00
Jan-00
Source: CoreLogic
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40
7%
6%
5%
4%
3%
Short Sale Rate (%)
Historical short sale rate
10%
9%
8%
2%
1%
0%
Sep-15
May-15
Jan-15
Sep-14
May-14
Jan-14
Sep-13
May-13
Jan-13
Sep-12
May-12
Jan-12
Sep-11
May-11
Jan-11
Sep-10
May-10
Jan-10
Sep-09
May-09
Jan-09
Sep-08
May-08
Jan-08
Sep-07
May-07
Jan-07
Sep-06
May-06
Jan-06
41
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Source: CoreLogic
Data analysis
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42
Analysis design
Now compared to pre-recession
Timeframes evaluated: 2001-2007 vs. 2007-2015
2001
2006
Pre-recession
Foreclosure/Short Sale
Window
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2007
2010 2015
Post-recession
Foreclosure/Short Sale
Window
43
Different types of buyers
3+
At the time of foreclosure
or short sale…
1
FIRST
MORTGAGE
TRADE
Owner
occupied
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2
FIRST
MORTGAGE
TRADES
FIRST
MORTGAGE
TRADES
Second
home
Investor
44
Rate of foreclosures that boomeranged is
up 2.3%
2001-2007
2001-2007
Foreclosures
Boomerangs
Boomerang rate
Owner occupied
1,455,000
89,000
6.2%
Second home
172,000
69,000
40.1%
Investors
34,000
15,000
45.1%
TOTAL
1,661,000
174,000
10.5%
2007-2015
2007-2015
Foreclosures
Boomerangs
Boomerang rate
Owner occupied
3,940,000
351,000
8.9%
Second home
620,000
103,000
16.7%
Investors
389,000
75,000
19.3%
TOTAL
4,949,000
529,000
10.7%
Change
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2.3%
45
…and short sales showing a similar trend,
up 8.9%
2001-2007
2001-2007
Short Sales
Boomerangs
Boomerang Rate
Owner occupied
63,000
8,000
12.4%
Second home
16,000
10,000
61.7%
Investors
4,000
3,000
68.0%
TOTAL
83,000
21,000
24.6%
2007-2015
2007-2015
Short Sales
Boomerangs
Boomerang Rate
Owner occupied
450,000
108,000
24.1%
Second home
124,000
42,000
33.9%
Investors
83,000
25,000
30.5%
TOTAL
657,000
176,000
26.8%
Change
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8.9%
46
Analysis design
Focus on post-recession
Timeframes evaluated: 2001-2007 vs. 2007-2013
2001
2007
2010 2015
Post-recession
Foreclosure/Short Sale
Window
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47
VantageScore® migration of foreclosed population
700
650
600
550
500
450
400
Overall
34
86
28
617
559
531
Before Event
700
650
599
Foreclosure Non-Boomerang Buyer
As of Event
675
565
Foreclosure Boomerang Buyer
After Event
Fallen Angels
128
750
110
113
110
94
719
715
681
600
587
550
716
606
500
Foreclosure Non-Boomerang Buyer
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Foreclosure Boomerang Buyer
48
VantageScore® migration of short sale population
700
650
600
550
500
450
400
Overall
87
24
698
653
590
Short Sale Non-Boomerang Buyer
Before Event
84
750
700
631
608
566
110
722
600
As of Event
Short Sale Boomerang Buyer
After Event
80
Fallen Angels
706
650
90
23
622
86
728
727
642
550
500
Short Sale Non-Boomerang Buyer
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Short Sale Boomerang Buyer
49
Average mortgage balance comparison
Foreclosure
Short Sale
$336,713
$286,703
$331,962
$307,717
$352,831
$325,307
$271,671
$228,009
Non-Boomerang
Buyer
Boomerang
Buyer
Fallen Angels
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Non-Boomerang
Buyer
Boomerang
Buyer
Subprime
50
How are Boomerang buyers paying debts now?
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51
Boomerang buyer current delinquency rates
Foreclosed population
12%
Boomerang
10%
10.6%
Non-Boomerang
US Avg
10.2%
8%
6%
6.3%
6.0%
4%
2%
0%
4.6%
4.6%
4.5%
4.2%
2.1%
2.1%
Auto
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Experian Public.
3.4%
0.0%
Bankcard
Retail
Mortgage
52
Boomerang buyer current delinquency rates
Foreclosed population
12%
Boomerang
10%
10.6%
Non-Boomerang
US Avg
10.2%
8%
6%
6.3%
6.0%
4%
2%
0%
4.6%
4.6%
4.5%
4.2%
2.1%
2.1%
Auto
3.4%
0.0%
Bankcard
Retail
Mortgage
8%
6%
4.6%
4.8%
4%
2%
5.3%
4.1%
2.6%
4.2%
4.6%
3.5%
3.7%
3.4%
2.1%
1.2%
5.9%
6.0%
2.2%
1.2%
0%
Auto
Bankcard
Owner Occupied
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Experian Public.
Second Home
Retail
Investor
Mortgage
US Avg
53
Boomerang buyer current delinquency rates
Short sold population
12%
Boomerang
10.4%
Non-Boomerang
US Avg
8%
7.4%
6.0%
4%
4.6%
4.6%
3.4%
1.3%
3.4%
3.3%
2.2%
2.1%
0%
Auto
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Experian Public.
Bankcard
Retail
0.0%
Mortgage
54
Boomerang buyer current delinquency rates
Short sold population
12%
Boomerang
10.4%
Non-Boomerang
US Avg
8%
7.4%
6.0%
4%
4.6%
4.6%
3.4%
1.3%
3.4%
3.3%
2.2%
2.1%
0%
Auto
Bankcard
Retail
0.0%
Mortgage
10%
8%
6%
6.0%
4.6%
4%
3.5%
2.1%
2%
1.5%
0%
1.0%
3.4%
4.1%
4.0%
3.3%
3.1%
2.8%
1.1%
Auto
1.3%
Bankcard
Owner Occupied
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Experian Public.
Second Home
Retail
Investor
1.9%
1.9%
Mortgage
US Avg
55
Of those that foreclosed or short sold after 2007
AND boomeranged – when was the mortgage
opened?
Foreclosed
Short Sold
40%
37%
% of Total Opened
35%
33%
30%
25%
22%
23% 23%
19%
20%
15%
15%
12%
10%
5%
4% 4%
0%
2011
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Experian Public.
2012
2013
2014
Year Mortgage Opened
2015
56
Mortgage seekers
Foreclosure
Short Sale
10.7%
26.8%
19.1%
17.6%
70.2%
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Experian Public.
RENT
55.6%
57
Mortgage seekers
Foreclosure
Short Sale
SEEKING
NOT SEEKING
SEEKING
NOT SEEKING
VantageScore
620
616
656
653
Income
51K
44K
57K
49K
Auto Delinquency
6.9%
6.2%
4.9%
4.6%
Bankcard Delinquency
12.1%
10.2%
11.1%
10.2%
Retail Delinquency
10.5%
10.1%
7.5%
7.4%
Averages
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58
Strategic defaulters
Individuals identified on the
credit file as consumers who
stopped paying on their first
mortgage while paying
perfectly on all other debts are
S T R AT E G I C
DEFAULTERS
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Strategic defaulters returning faster
The percentage of boomerang buyer population who
were strategic defaulters at the time of their event
Boomerang
Non-Boomerang
26.3%
18.5%
13.9%
9.5%
Foreclosure
Short Sale
Data from 2007-2013 @ Time of Default
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60
Strategic defaulters
Current delinquency rates on foreclosed population
8%
Boomerang
6%
6.0%
4%
4.6%
3.4%
2.9%
2%
0%
US Avg
3.4%
2.2%
2.1%
1.0%
Auto
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Experian Public.
Bankcard
Retail
Mortgage
61
Strategic defaulters
Current delinquency rates on foreclosed population
8%
Boomerang
6%
6.0%
4%
4.6%
3.4%
2.9%
2%
0%
US Avg
3.4%
2.2%
2.1%
1.0%
Auto
Bankcard
Retail
Mortgage
8%
6%
6.0%
4.6%
4%
3.4%
4.6%
5.0%
3.6%
2.1%
2%
1.3%
0%
2.7%
2.8%
2.6%
2.4%
1.8%
0.7%
0.6%
Auto
Bankcard
Owner Occupied
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Experian Public.
Second Home
1.4%
Retail
Investor
Mortgage
US Avg
62
Strategic defaulters
Current delinquency rates on short sold population
7%
6%
5%
4%
3%
2%
1%
0%
Boomerang
US Avg
6.0%
4.6%
3.4%
0.7%
2.1%
Auto
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Experian Public.
2.6%
2.3%
1.5%
Bankcard
Retail
Mortgage
63
Strategic defaulters
Current delinquency rates on short sold population
7%
6%
5%
4%
3%
2%
1%
0%
Boomerang
US Avg
6.0%
4.6%
3.4%
0.7%
2.1%
Auto
2.6%
2.3%
1.5%
Bankcard
Retail
Mortgage
8%
6%
6.0%
4.6%
4%
2%
3.4%
0.7%
2.1%
0.8%
2.8%
0.0%
0%
Auto
2.7%
2.5%
Owner Occupied
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Experian Public.
Second Home
1.5%
2.0%
0.0%
0.5%
Bankcard
1.5%
2.5%
Retail
Investor
Mortgage
US Avg
64
What is the profile of a strategic default?
Number of first
mortgages
Consumers who had multiple mortgages were more likely
to default on one of them
Origination
VantageScore®
Higher VantageScore® borrowers were more likely
to strategically default
Home equity
line default
behavior
Strategic defaulters are more likely to stay current
on their home-equity lines prior to mortgage default
Origination
mortgage
balance
Consumers with a higher mortgage origination balance are
more likely to strategically default
Geographic
areas
States such as California and Florida that have suffered more
drastic home price declines than other states tend to have
higher rates of strategic default
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Internal Use
For additional information: Michele.Raneri@experian.com Twitter Handle: MLRaneri
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