Named the Nation’s Best Newsletter by NAREE
April 2017 Vol 11 Issue 4
MY TAKE By Manvinder Saraon LendingHome P10
SPLITTING THE ATTOM In Search of the Goldilocks Pre-Mover Lead P15
DATA IN ACTION Top 25 Single Family Rental Growth Markets for 2017 P20
P1 WILL THE TIDE FINALLY TURN FOR FEDERALLY SUBSIDIZED FLOOD INSURANCE?
President Trump’s 2018 budget proposal says it’s time to restructure user fees for the National Flood Insurance Program (NFIP) “to ensure that the cost of Government services is not subsidized by taxpayers who do not directly benefit.” This sounds like pretty mundane stuff, but what it really means is higher premiums if the proposal goes through. How high? High enough to potentially result in lower property values and far fewer sales along America’s beaches, riverfronts, and lakesides. The mortgage industry has finally begun to move from the Dark Age into the Digital Age. With the recent introduction of the online mortgage, the piles of paperwork and endless back-and-forth that characterized the traditional mortgage process are now being replaced by online applications, document uploads, and e-signatures. But for homebuyers born into the digital age, simply retro-fitting the complex, opaque old-school mortgage application into an online form isn’t enough to meet their expectations of quality service. Prospective home buyers who want to pay the lowest possible property taxes should purchase an investment property in Alabama in a congressional district with a Republican representative, according to an ATTOM Data Solutions analysis of property tax data for more than 84 million single family homes nationwide. The older property, the better, and it also helps if the owner is unmarried and holds on to the property for more than 20 years. P14 BIG DATA SANDBOX: HOW TO GET AWAY WITH PAYING THE LOWEST PROPERTY TAXES P10 MY TAKE: MORTGAGE OF THE FUTURE WILL BE DESIGNED FOR DIGITAL NATIVES
P15 SPLITTING THE ATTOM: IN SEARCH OF THE GOLDILOCKS PRE-MOVER LEAD
Most pre-mover leads available today are either too hot or too cold. The first two methods of generating pre-mover leads — modeled public record data and listing data — generate a high proportion of leads that are all sizzle and no steak. The third traditional method for generating pre-mover leads — sales deed data — is too cold in the sense that the lead by definition lags the actual move. But there is now another option that is “just right.”
P19 NEWS BRIEFS
P20 DATA IN ACTION: TOP 25 SINGLE FAMILY RENTAL GROWTH MARKETS FOR 2017
In all 25 counties, average weekly wages increased at least 5 percent annually and outpaced growth in fair market rents. All 25 counties also had gross annual yields of 9.5 percent or higher. See all the numbers in-depth and view an interactive heat map showing 2017 SFR potential for 375 markets nationwide.
Will the Tide Finally Turn for Federally Subsidized Flood Insurance?
BY PETER MILLER, STAFF WRITER
A short sentence buried in the middle of a 62-page document puts in play the future value of waterfront property now worth more than $1 trillion. The President’s 2018 budget proposal says it’s time to restructure user fees for the National Flood Insurance Program (NFIP) “to ensure that the cost of Government services is not subsidized by taxpayers who do not directly benefit.”
and recreational housing. But with rising tides and growing insurance claims the government’s crucial role as the main source of flood insurance is now getting a second look. The big question is very simple: How can homeowners finance and insure property that is increasingly vulnerable to changing weather patterns? To understand the government’s role in waterfront development — and why the 2018 proposed budget changes could potentially lead to lower values and fewer
This sounds like pretty mundane stuff, the usual policy blather that goes on in D.C., but what it really means is higher premiums if the proposal goes through. How high? High enough to potentially result in lower property values and far fewer sales along America’s beaches, riverfronts, and lakesides. Flood Insurance Affordable (For Now) Waterfront property is always in demand, sought-after real estate that represents some of our most valuable residential
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Homes in High Risk Flood Zones: County Heat Map
Pct of Homes in High Risk Flood Zones
Click on map to view interactive nationwide heat map
U.S. Single Family Homes by Flood Risk
sales — just look at a typical flood zone transaction. Smith buys a property which is financed by a lender. The lender sees the property as security for the mortgage and as a result requires the borrower to maintain property and flood insurance for the life of the loan. This is where the government comes in: Under the National Flood Insurance Program property owners can get coverage for up to $250,000 for the property and $100,000 for the contents. The government also provides master coverage for condo associations. Given federal backing, lenders are happy to make waterfront mortgages. While storms and floods are often associated with coastal areas, the NFIP program is actually much broader. According to William E. Brown, president of the National Association
High Risk Flood Zones Requiring Flood Insurance
2,713,157 3% 76,932,857 97%
All Other Homes
of Realtors, “policyholders in over 22,000 communities across the country depend on the NFIP to protect homes and businesses from torrential rain, swollen rivers and lakes, snowmelt, failing infrastructure, as well as storm surges and hurricanes.” An analysis of public record property data and flood zone data by ATTOM Data Solutions shows that more than 2.7 million single family homes nationwide are in higher-risk flood zones requiring
flood insurance, representing 3.4 percent of all single family homes. The combined estimated market value of these homes in higher-risk flood zones is more than $904.6 billion, representing 3.9 percent of the total combined market value of all single family homes. The current arrangement assumes that flood insurance will be affordable and available from either the government or the private sector for as long as
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Costliest Named Storms
U.S. Single Family Home Value by Flood Risk
High Risk Flood Zones Requiring Flood Insurance
Katrina Sandy Ike Andrew Wilma Irene Charley Ivan Rita Frances
2005 2012 2008 1992 2005 2011 2004 2004 2005 2004
3 – 2 5 3 1 4 3 3 2
$108.0 billion $71.4 billion $29.5 billion $26.5 billion $20.6 billion $15.6 billion $15 billion $14.2 billion $10.0 billion $8.9 billion
$904,639,800,822 4% $22,379,244,361,018 96% All Other Homes
loans and existing borrowers will be in violation of mortgage requirements and can potentially face foreclosure. The only buyers left will be all-cash purchasers with a love of waterfront property and bargain prices. At this point flood insurance is available and affordable but things can change. The federal flood insurance program is — forgive the expression — deeply underwater. The NFIP owes $24.6 billion to the Treasury, the very reason the 2018 budget proposal talks about ending federal subsidies. By The Numbers In the 37-year period between 1980 and 2017 there were 203 separate weather “events” with damages of at least $1 billion according to the National Centers for Environmental Information. The total cost? More than $1.1 trillion. About a decade ago the flood insurance game changed. Hurricanes Katrina, Rita, and Wilma racked up nearly $140 billion in damages in a single year. In 2012 Superstorm Sandy caused damages worth more than $70 billion.
the mortgage is outstanding. But what if such assumptions are wrong?
• If insurance costs are too high then marginal borrowers will exceed debt- to-income ratios and not be able to get financing. That means the pool of potential borrowers will shrink, demand will decline, and property values will be pushed down. • If premiums rise borrowers must continue coverage, regardless of the increase. To lose coverage means violating the mortgage terms, thereby giving the lender the right to purchase high-cost “force-placed insurance” with reimbursement from the borrower. • Without flood insurance the waterfront lender has the right to foreclose, however that might be an option lenders want to avoid. The reason? The foreclosure process can be expensive, slow, and complex. • If flood insurance is simply unavailable in certain areas then mortgage applicants will be unable to get new
Source: NOAA Through 2013. Amounts not corrected for inflation
Not all the storm losses represent insurance claims because in many cases property owners do not have coverage. Like insurance actuaries, homeowners check the odds as best they can and many elect to go without coverage, a logical choice in areas without a flooding history. That approach generally works, but not always. For instance, in 2016 severe rainstorms hit the Baton Rouge area. This was not a hurricane; instead it was just a storm without a name, but one which according to the Insurance Information Institute resulted in 21,720 paid claims against the NFIP. Such claims were worth $1.738 billion, the fourth largest total for a single weather event. The problem for homeowners — and the problem for insurance companies and mortgage lenders — is that places once assumed to be safe and dry are
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increasingly on the wrong side of high water markers. In the 2016 Louisiana storm there were almost 22,000 insurance claims but the vast majority of properties had no coverage. According to Gov. John Bel Edwards, the August storm flooded more than 100,000 homes and produced damage worth more than $8.7 billion. Beliefs About Global Warming A new survey from Gallup finds “a record number of Americans sounding the alarm on global warming.” According to Gallup:
“Katrina’s nature as a loss event comprising both wind and water damage exposed ambiguities in insurance policies, many of which led to claim disputes and litigation,” according to Marsh, a part of the Marsh & McLennan Companies, a major international insurance brokerage and risk management firm. “And while computer catastrophe models were in use at the time, they proved to be greatly out of line with actual losses, putting pressure on insurers. Katrina thus became a turning point for the insurance industry on many fronts, including: CAT (catastrophe) modeling, property policy wording, claims handling, and crisis management.” It’s well documented that more than 1,800 people died in several Gulf states because of Katrina while at the same time 80 percent of New Orleans was impacted. It’s also common knowledge that much of the city is below sea level. What’s not well-known is this: In 2016 the Federal Emergency Management
Agency (FEMA) issued new flood maps for New Orleans.
“Overnight,” said National Public Radio (NPR), “more than half the population moved out of the so-called high-risk zone.” “The new maps are like a bureaucratic magic trick,” explained NPR. “At the stroke of midnight, the federal government waved its wand, and Friday morning more than half of New Orleans woke up in a land safe from storms and flooding.” Problems with government flood maps may soon come to an end. The 2018 budget calls on Congress to defund the NFIP’s Flood Hazard Mapping Program to save $190 million a year. Regardless of what FEMA says, much of New Orleans remains below sea level and private maps show the entire city faces substantial flood risks. However, by gerrymandering the official maps FEMA expanded the areas where flood insurance is not required. What do people
• “Concerned Believers’ at 50 percent, up from 37 percent in 2015.”
• “Mixed Middle’ falls to 31 percent, well below recent high of 45 percent.” • “Cool Skeptics’ remains smallest group at 19 percent, down from 26 percent in 2015.”
Not only are public attitudes changing, so are industry views.
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do when flood insurance is not required? They don’t buy it. What happens when people do not buy flood insurance? There are fewer insurance claims. The fact that flood maps say an area is high and dry can cause damages in surprising places when wrong. Speaking before the House Financial Services Subcommittee on Housing and Insurance in January 2016, Steven Bradshaw, Executive Vice President of Standard Mortgage Corporation in New Orleans, said “many homes that were destroyed by Hurricane Katrina were not located in a special flood hazard area. Homes outside of those zones are not required to have flood insurance. As a result, mortgage servicers were liable for the costs when those homes were wiped out.” The conflict — in New Orleans and elsewhere — is that mortgage lenders, investors and servicers naturally want
costs of flooding” resulted in substantially higher premiums for many property owners. According to Janice Baker with Affordable Home Insurance in Miramar Beach, Florida, some homeowners saw premiums go from $3,000 a year to $9,000. An article detailing the fallout from this attempt at flood insurance reform in the December 2013 Housing News Report recounted the story of one homeowner in Pasco County, Florida — where nearly 35,000 homes representing more than 20 percent of all homes in the county are in high-risk flood zones requiring flood insurance — whose flood insurance premium rose from $3,300 in 2012 to $24,300 in 2013. Thanks to horror stories like these, the public outcry produced an immediate result, and the government backed off instant premium increases. However — regardless of what happened with Biggert-Waters — the claims continued to pile up. While $20 billion was owed in 2012 the NFIP now owes $24.6 billion to the Treasury. premiums should be raised to the point where the program is no longer taxpayer subsidized. Given a $24 billion deficit, that could be a huge increase. In effect, Biggert-Waters 2.0, a program where higher costs will force owners with marginal finances to sell their units. The budget plan is “an attack on Americans with flood insurance policies, as it would raise the cost of flood How will the money be repaid? The 2018 budget proposal says
enough coverage to protect against all conceivable losses while insurance companies with equal logic want to avoid excess claims. The solution? Get Uncle Sam to take on the risk. The 2018 budget response? Enough is enough; why should taxpayers who live far from shorelines subsidize seafront condos and vacation hideaways? Retracted Flood Insurance Reform In an effort to head off financial failure the government enacted the Biggert- Waters Reform Act of 2012. The new law was necessary, said the Federal Emergency Management Agency (FEMA), because “over the years, the costs and consequences of flooding have continued to increase. For the NFIP to remain sustainable, its premium structure must reflect the true risks and costs of flooding. This is a primary driver for many of the changes required under the law.” That drive to reflect the “true risks and
The President’s 2018 budget proposal says premiums should be raised to the point where the program is no longer taxpayer subsidized.”
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unavailable, and waterfront real estate prices will plummet — a politically unacceptable result. According to NAR’s Brown, when the NFIP expired more than “1,300 home sales were disrupted every day as a result. That’s over 40,000 every month. Flood insurance is required for a mortgage in the 100-year floodplain, but without access to the NFIP, buyers simply couldn’t get a mortgage or vital protection from the No. 1 cause of loss of property and life: flooding.” The bottom-line reality is that from a government perspective it’s cheaper to have flood insurance subsidies than to devalue millions of waterfront properties, especially when the future availability and price of private flood insurance are uncertain. Future Costs Will Be Higher Costs and claims in the future are likely to be higher if only because risks are growing as waterfront areas become increasingly developed and populated. No less important, while the seas are rising shorelines are not. This year, Elder Dallin H. Oaks — one of the 12 Apostles of the Church of Jesus Christ of Latter-day Saints — told graduates at Brigham Young University-Hawaii, that “seacoast cities are concerned with the rising level of the ocean, which will bring ocean tides to their doorsteps or over their thresholds.”
insurance, despite the fact that many of them are already struggling with unaffordable premiums,” said Rep. Maxine Waters, D-CA, co-sponsor of the 2012 legislation. Waters has an alternative to the 2018 budget plan. Her solution? Forgive the $24 billion owed to the Treasury and start fresh. “Because I am so concerned about the premium costs of this insurance to our constituents,” said Waters in March, “I would love to forgive the whole $24 billion, wipe it out.”
owners are currently limited by regulatory barriers to purchasing a one-size-fits- all NFIP flood insurance product, even though private policies can offer more comprehensive coverage at a better rate. This bill would remove excessive restrictions and would give states more flexibility to license and regulate private flood insurance.” The proposal has bi-partisan support in this Congress but did not go anywhere in the last one. The legislation raises several issues; First, can private insurers actually deliver superior coverage at a lower cost? Second, if more property
Maxine Waters U.S. Representative for California’s 43rd congressional district Because I am so concerned about the premium costs of this insurance to our constituents, I would love to forgive the whole $24 billion, wipe it out.”
The experience with Biggert-Waters shows that it will be politically impossible to raise premiums to the point where the flood insurance program is self-sufficient. At the same time forgiving $24 billion in debt is an “an unrealistic wish” as Waters admits. Paying off the current NFIP debt would effectively result in a subsidy for past property owners covered under the program, a $24 billion gift. An alternative choice is HR 1422, the Flood Insurance Market Parity and Modernization Act. The bill’s sponsor, Rep. Dennis A. Ross, R-FL, says “property
owners use private insurance then how will the NFIP program be funded? Third, will private insurers flock to the flood insurance business given past government losses? Government Insurance Entanglements If a corporation had a product which racked up almost $25 billion in losses, the solution would be obvious: stop. The catch is that the government is not a corporation. It must continue the flood insurance program because if coverage ends enormous numbers of borrowers will be in default, new financing will be
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Such realities are creating new costs for waterfront cities. Miami, as one example, is spending $400 million to develop a pumping system. New York City estimates that 800,000 people will be living in 100- year flood zones by 2050, double the number today. It’s spending almost $20 billion to erect a levee system to protect lower Manhattan. Not to be outdone, it’s now estimated that California faces $50 billion in flood control bills. The city admits that its plan will not make New York “climate-change proof,” however the hope is that it will reduce future losses. “Lives will be saved and many catastrophic losses avoided,” according to a 2013 report produced by New York City. “For example, while Sandy caused about $19 billion in losses for our city, rising sea levels and ocean temperatures mean that by the 2050s, a storm like Sandy could cause an
estimated $90 billion in losses (in current dollars) – almost five times as much.”
in home sales activity in 2016, it’s evident from this data that natural hazard risk does make a difference to homebuyers and investors who are active in this housing market,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. ATTOM reports that home sales in counties with high levels of exposure to natural hazards saw home sales rise 1.9 percent in 2016 versus 4.6 percent in counties with less risk. Weakness in sales volume is even more apparent in counties with a high risk index for flooding — meaning a high percentage of homes in high risk flood zones requiring flood insurance — according to the ATTOM report. Home sales volume in counties with a “Very High” flood risk was down 3 percent in 2016 compared to the previous year
It’s not just New York and Miami.
“Federal scientists have documented a sharp jump in this nuisance flooding — often called ‘sunny-day flooding’ — along both the East Coast and the Gulf Coast in recent years,” according to an article in the The New York Times. “The sea is now so near the brim in many places that they believe the problem is likely to worsen quickly. Shifts in the Pacific Ocean mean that the West Coast, partly spared over the past two decades, may be hit hard, too.”
There is evidence that the market already sees dangers by the shore.
“While price and affordability along with access to jobs are the primary drivers in local markets with strong increases
VERY HIGH FLOOD RISK COUNTIES
VERY LOW FLOOD RISK COUNTIES
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Whether private-sector insurers will want to enter the flood-insurance business is unclear.
“While the National Flood Insurance Program (NFIP) explores the potential to share at least some of its exposure with primary insurers, reinsurers, and/ or catastrophe bond investors,” said the Deloitte Center for Financial Services in a 2014 report, “there is no guarantee that such private market players will be eager or even willing to take on such risks, considering the factors that have left the current federal program so heavily in debt.” Future Options What are the options which might make flood insurance more viable? One possibility is the increasing use of piggyback policies where the first $250,000 in coverage comes from the NFIP and the balance is through the private sector. Such policies could be required by mortgage lenders making big loans on waterfront properties. Second, a one-claim-and-out policy could be adopted. According to the American Academy of Actuaries, “about 1 percent of NFIP-insured properties have accounted for more than 33 percent of the claims paid, according to one estimate. Owners of properties that have incurred multiple claims for flood damage could be required to pay higher insurance premiums.”
The combination of changing weather and ongoing insurance coverage will have to be resolved because flood insurance that is either too costly or simply unavailable threatens too many properties in too many places to be tolerated.”
and up 10.7 percent over the past five years — three times slower than the 36.5 percent increase in sales volume in the past five years in counties with a “Very Low” flood risk. Room For Private Flood Insurance? The combination of changing weather and ongoing insurance coverage will have to be resolved because flood insurance that is either too costly or simply unavailable threatens too many properties in too many places to be tolerated. One very possible alternative is a greater involvement by the private insurance industry.
to lower premiums to the point where the private sector has been unable to compete. Writing for Forbes last August, Michael Thrasher explained that “primary insurers — those that sell standard insurance policies to individuals and businesses — haven’t sold flood insurance in the private market for more than half a century. Companies could not charge affordable premiums and profit when private flood insurance was proposed in the 1950s. The lack of a private market ultimately led to the creation of the National Flood insurance Program (NFIP) in 1968 and the sale of government flood insurance policies that the private market was unable to compete with, until recently.”
The $24 billion in taxpayer subsidies provided so far have allowed the NFIP
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Third, “flood resistant” construction standards were updated in 2009, 2012, and 2015. No doubt they will be updated again in the effort to hold down damages and claims. higher elevation requirements for properties seeking HUD assistance or Federal Housing Administration (FHA) mortgage insurance.” For the first time in nearly 40 years, HUD is proposing to establish “For the first time in nearly 40 years,” said the Department, “HUD is proposing to establish higher elevation requirements` for properties seeking HUD assistance or Federal Housing Administration (FHA) mortgage insurance.” According to the Department, “HUD’s proposed rule would require that properties deemed ‘non-critical’ to be elevated two feet above the site’s base flood elevation (also called 100-year floodplain), a term commonly used in floodplain management. Properties considered ‘critical,’ such as hospitals, nursing homes, and police/fire facilities, For example, in October HUD proposed a new flood “resilience standard.”
would be elevated to three feet above the base flood elevation or the 500-year floodplain, whichever is greater.” Fourth, flood insurance premiums will have to rise because the present system is untenable. This will mean that some owners with marginal finances will no longer be able to afford waterfront property. Other owners, faced with rising premiums, will no longer purchase flood insurance, something that may already be happening: according to a 2016 report by the Insurance Information Institute “12 percent of American homeowners had a flood insurance policy, lower than the 14 percent who had the coverage in 2015.” Fifth, the $24 billion owed to the Treasury is unlikely to ever be repaid. The growth of a private presence in the flood insurance field will not bring new dollars to the government.
Sixth, the 2018 budget is unlikely to be passed as written. However, it opens the flood insurance discussion months before the NFIP authorization ends later this year on Sep. 30. Seventh, flood prevention efforts need to be seen as not only benefiting waterfronts but also as a jobs program. Replicate the New York effort nationwide — something which seems increasingly necessary — and you can easily have a $1 trillion infrastructure program that would cut flood insurance claims and at the same time create jobs throughout the economy, benefits that would be good for everyone. Lastly, the NFIP will have to be re- authorized this year for a very simple reason: There is nothing to replace it at this time and flood insurance subsidies are far cheaper than devaluing millions of waterfront properties.
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Mortgage of the Future Will Be Designed for Digital Natives
The mortgage industry has finally begun to move from the Dark Age into the Digital Age. While technological innovations have re-imagined many other consumer financial services over the past few years, mortgages lagged behind. Now, with the recent introduction of the online mortgage, the piles of paperwork and endless back-and-forth that characterized the traditional mortgage process are now being replaced by online applications, document uploads, and e-signatures.
opaque old-school mortgage application into an online form isn’t enough to meet their expectations of quality service. These digital natives require a highly customized, low-cost mortgage experience that puts them in control of their own homebuying destiny. Digital Natives Are Entering the Homebuying Market 15.8 million new homebuyers—many of whom are highly tech-savvy—have already entered or are expected to enter the market between 2015 and 2025, according to research from Big
Manvinder heads LendingHome’s Consumer Mortgage business with a focus on putting the customer first. He has more than 15 years of marketing leadership experience across multiple industries, including Executive in Residence at Maveron advising portfolio companies on growth, the first CMO at Kabam, and Head of Marketing of major product lines at Intuit.
But for homebuyers born into the digital age, simply retro-fitting the complex,
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Shifts Ahead: Demographic Clarity for Business , a new book from John Burns Real Estate Consulting. Many of these first-time buyers grew up alongside technology and expect their mortgage experience to meet the same high standards set by their ability to seamlessly book travel online or order a car via their mobile devices. The first generation of online mortgage lenders allows borrowers to fill out an online application at the start of the process, in the same way the first
generation of online travel companies allowed customers to put their travel preferences into an online form before being passed along to a booking agent. But the generation of consumers poised to enter the housing market expect more, starting with an experience designed to meet their specific needs. A Personalized Mortgage Experience Digital natives have grown up alongside streaming video services that quickly learn whether they prefer quirky dramas to lighthearted comedies and
music apps that use their listening history to create curated playlists. When they provide information about themselves to a company, consumers who have grown up in a digital world expect to receive products and experiences customized for their preferences and personal situation in return. And they expect to be able to see and understand those products online, not via lengthy phone conversations with a sales representative. Choosing a mortgage is something that most consumers will do only a handful of times in their lives. So while many will do some research on the differences between a 30-year fixed and a 5-year ARM, they turn to their lenders to understand their situation—ideally via data provided online—and help them find and choose the product that best fits their situation. They want to be able to see the impacts of trading points—exchanging paying more up front for paying less monthly, or vice versa—on their estimates and then actually trade points with the click of a button. Transparency from the start into monthly payments and estimated fees is essential for gaining the trust of these homebuyers, who tend to be more skeptical than their parents, especially when they’re being sold to. Control For the Customer For today’s homebuyers, the desire for control over their mortgage starts with finding a product customized for their situation and then extends through the
Transparency from the start into monthly payments and estimated fees is essential for gaining the trust of these homebuyers, who tend to be more skeptical than their parents, especially when they’re being sold to.”
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manual processing that must be done to underwrite and fund a loan. A deep technology platform can cut into these costs by automating large portions of this dated process. Increased operational efficiencies will enable faster, cheaper, and more accurate loan processing for consumers, pushing the mortgage experience closer to their expectations. A Mortgage for the Future As digital natives begin to pour into the housing market, they will look for a mortgage experience that meets the high standards they’ve set after growing up in a digital age. The lenders that gain their trust and offer them the experience they expect will be set up to become a partner for them as they move towards the milestone of buying a home.
A deep technology platform can cut into these costs by automating large portions of this dated process. Increased operational efficiencies will enable faster, cheaper, and more accurate loan processing for consumers, pushing the mortgage experience closer to their expectations.”
application and approval process. The loan application itself should be designed to be intuitive and interactive, allowing borrowers to navigate through it primarily on their own with the help of built-in tips along the way. Once borrowers find a mortgage that fits their needs, they want to know exactly where they stand with their financing at every step until closing. Digital natives expect to be able to check the status of their loan at any time and from any device. Feedback should be provided throughout the application process, and
qualification decisions must be delivered as soon as possible.
A Cheaper, More Efficient Mortgage Process
Digital natives have seen the cost of many services, especially those that once relied on middlemen—like travel agents— lowered as technology takes on a greater share of the workload. Currently, the Mortgage Bankers Association estimates that the average cost for a lender to originate a mortgage is $8,000, largely thanks to the hours of
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BIG DATA SANDBOX
Prospective home buyers who want to pay the lowest possible property taxes should purchase an investment property in Alabama in a congressional district with a Republican representative, according to an ATTOM Data Solutions analysis of property tax data for more than 84 million single family homes nationwide. The older property, the better, and it also helps if the owner is unmarried and holds on to the property for more than 20 years. While most buyers won’t have (or want) full control over many of these factors, property taxes are the second biggest cost of homeownership after the mortgage, and they should be carefully factored into any potential property purchase.
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SPLITTING THE ATTOM
In Search of the Goldilocks Pre-Mover Lead
RICHARD LOMBARDI COO, ATTOM DATA SOLUTIONS
Most pre-mover leads available today are either too hot or too cold.
As such, pre-mover leads are of interest to many companies because they represent an opportunity to gain business — in the case of moving companies, storage facilities or home renovation — or to avoid losing business — in the case of Internet, Cable TV and home security providers.
Traditionally pre-mover leads have been generated using one of three methods, which is where the too-hot-and-too-cold discussion comes back into play.
That statement will be explored later in this article, but first a brief primer on pre-mover leads: these are leads intended to identify homeowners or tenants moving out of a home. The soon-to-move occupants are in need of a variety of services ranging from moving companies to storage facilities to home renovation (if the occupant was like Goldilocks and broke some furniture or other items in the house). They also often need to cancel or transfer a variety of services such as Internet, Cable TV and home security.
Lots of Sizzle, Little Steak The first two methods for generating
The soon-to-move occupants are in need of a variety of services ranging from moving companies to storage facilities to home renovation. ... They also often need to cancel or transfer a variety of services such as Internet, Cable TV and home security.”
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SPLITTING THE ATTOM
pre-mover leads— modeled public record data and listing data — generate leads that are too hot in the sense that a high proportion are all sizzle and no steak: people who may never actually move or whose move is at some indeterminate point in the future. The modeled leads specifically represent a list of properties that are likely to sell at some point in the near future, thus representing a potential mover. The likelihood to sell is based on an algorithm that takes into account a variety of factors that might include how long the property has been owned, how much equity the homeowner has and personal characteristics of the homeowner such as age, marital status, number and age of kids. In a typical modeled lead structure, all properties in a given market are assigned a “likelihood-to-sell” score and the top 10 percent of scores are designated as the leads.
This is all very sexy stuff, and many smart data scientists are getting much better at creating highly sophisticated predictive modeling to develop these leads. But at the end of the day, modeled leads fall short — at least as pre-mover leads; they work much better as listing leads or leads for real estate investors — because they ultimately don’t represent a person with an imminent intent to move, let alone a concrete moving date. These are folks who haven’t even made the decision to sell yet, so when they receive solicitation for moving services, it doesn’t fit their current situation or mindset. Faulty Assumption Foundation The second of the “too hot” leads are generated from homes listed for sale on the local multiple listing service (MLS). Not a lot of sexy data science or predictive modeling here, just a basic assumption that if someone lists a home for sale the occupants will soon
be moving out of that home. The only problem is that’s not a safe assumption. Only about 55 percent of all homes listed on the MLS end up selling, according to an analysis of MLS data by Clear Capital. Even for the 55 percent that do end up selling, the listing provides no information about when that will occur. That means companies marketing to the occupants leaving those properties are shooting at a target while blindfolded. They know the target is there; they just can’t see to nail the bullseye or anywhere close to the bullseye. Not to mention that the target isn’t even there almost half the time.
Time Travel Not Included The third traditional method for
generating pre-mover leads— sales deed data also obtained from public records data — is too cold in the sense that the lead by definition lags the actual move.
But at the end of the day, modeled leads fall short ... because they ultimately don’t represent a person with an imminent intent to move, let alone a concrete moving date.”
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SPLITTING THE ATTOM
because of the time-sensitive nature of those services. Frankly the MLS listing data really doesn’t work as a lead at all — at least for any broad application — and is simply the result of trying to fit a square peg into a round hole. That MLS listing data is being sold as a pre-mover lead at all is certainly a testament to the strong demand for leads in the marketplace and the fact that up until recently there has not been a customized pre-mover lead that is just right for those offering moving- related services. A Goldilocks-Worthy Pre-Mover Lead Realizing this gap in the lead-generation marketplace, ATTOM Data Solutions last year embarked on a quest to find a Goldilocks-worthy pre-mover lead for the industry: one that is neither too hot nor too cold. After some extensive testing — These three methods of generating pre-mover leads have been used because they have been the best available, but the truth is that none of these were never originally designed as pre-mover leads — which is why they end up being either too hot or too cold for companies focused on moving-related services.”
That means that once a company gets the lead it may be too late. These leads have the advantage of including a concrete moving date in the form of the closing date on the sales deed, but they are often not actionable because of the lag time involved in collecting sales deed data. Companies interested in marketing to the occupants moving into the property can still use these public record leads somewhat effectively, but keep in mind that in many parts of the country it can take 45 days or more from the sale date to when the actual sales deed is recorded. By that time the new occupant moving in may have already secured many of the moving-related services he or she might need. Square Peg, Round Hole These three methods of generating pre- mover leads have been used because they have been the best available, but the
truth is that none of these were originally designed as pre-mover leads — which is why they end up being either too hot or too cold for companies focused on moving-related services. Modeled leads are really designed for real estate agents, investors and others looking to find homeowners who may be likely to sell but have not made that decision yet as evidenced by the fact that the property is not yet listed. These leads are great for agents and investors, who are offering services to help the homeowner sell the property. The public record leads help to power some of the predictive analytics used for the modeled leads, but as a stand-alone lead they are best-suited for companies providing more long-term services for homeowners and occupants. They’re just not ideal for companies offering services specifically related to the moving process
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SPLITTING THE ATTOM
which I’ll get to in a moment — we believe we’ve developed one that fits the bill.
matched to a closed sale within 30 days of the estimated settlement date included on the lead and that 75 percent matched to a closed sale date within 90 days. Companies can now market to these pre-mover leads with a high degree of confidence, knowing that two-thirds of the current occupants they market to will be actually moving within the next 30 days following a specific date, and 75 percent will be moving within 90 days. This data-based market intelligence provides the marketer with the tools they need to set up a targeted, time-sensitive and ultimately effective campaign.
Not only is that estimated moving date provided, it’s also highly predictive, according to an extensive analysis that ATTOM conducted prior to releasing this lead product to the marketplace. We looked at three years’ worth of historical pre-mover leads that would have been generated using this new method and matched it against sales deed data. We found that 67 percent of the leads
This new pre-mover lead is derived from loan pre-approvals for purchases of residential real estate — an event that is in close proximity to the actual move and also includes an actual date estimated for the move in the form of a settlement date included on the pre-approval documents.
Not only is that estimated moving date provided, it’s also highly predictive, according to an extensive analysis that ATTOM conducted prior to releasing this lead product to the marketplace.”
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HOUSINGNEWS REPORT real estate auctions CWCOT 2 nd Chance Nationwide Foreclosures • Discounted Below Appraisal • Exempt from FHA 90-Day Flipping Rule
Existing Home Sales Slow, Price Growth Acclerates in February
Existing home sales pulled back 3.7 percent in February from a nearly decade high level in January, according to the National Association of Realtors, which reported that existing homes sold at a seasonally adjusted annual rate of 5.48 million during the month, down from 5.69 million but still 5.4 percent higher than a year ago. The median sales price of existing homes that sold in February was $228,400, according to the trade organization, up 7.7 percent from a year ago — the strongest annual appreciation since January 2016 and marking the 60th consecutive month with an annual increase. New Home Sales Volume Up, Prices Down New home sales in February increased 6.1 percent from the previous month and were up 12.8 percent from a year ago to a seasonally adjusted annual rate of 592,000 — the highest level since July 2016, according to estimates from the U.S. Census Bureau and Department of Housing and Urban Development. The report shows the median sales price for new homes sold in February was $296,200, down 3.9 percent from January and down 4.9 percent from a year ago. Building Permits for 5+ Units Up 26 Percent in March, Housing Starts at 1.2 Million Annual Pace Building permits for privately owned housing units were authorized at a seasonally adjusted annual rate of 1.26 million in March, up 3.6 percent from the previous month and up 17 percent from a year ago, according to residential construction statistics released by the U.S. Census Bureau and U.S. Department of Housing and Urban Development. The biggest increase came in building permits for housing with 5 units or more, which were up 26.1 percent from a year ago while building permits for 2-to-4-unit housing was up 5.9 percent and building permits for 1-unit housing was up 13.5 percent. The report also shows housing starts in March were at a seasonally adjusted annual rate of 1.2 million, 6.8 percent below the previous month but still 9.2 percent above the March 2016 level. Housing starts were down from a year ago in the Northeast (14.9 percent decrease) and Midwest (2.5 percent decrease), but up in the South (19.4 percent increase) and West (9.2 percent increase).
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ATTOM Data Solutions • P19
DATA IN ACTION
Top 25 Single Family Rental Growth Markets for 2017
2017 3 Bedroom Monthly Rental Amount
Q1 2017 Median Sales Price
YoY Pct Change in Median Sales Price
2017 Annual Gross Rental Yield
Q3 2016 YoY Wage Growth
Augusta-Richmond County, GA-SC
Pennsylvania Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
Sioux City, IA-NE-SD
Atlanta-Sandy Springs-Roswell, GA
Little Rock-North Little Rock- Conway, AR New York-Newark-Jersey City, NY-NJ-PA Charlotte-Concord-Gastonia, NC-SC
Cedar Rapids, IA
New Orleans-Metairie, LA
Little Rock-North Little Rock- Conway, AR
Minnesota Minneapolis-St. Paul-Bloomington, MN-WI
Transforming the Future of Property Data At ATTOM Data Solutions our mission is to increase real estate transparency by arming businesses and consumers with the property data needed to make wise decisions. www.attomdata.com
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