1. Mortgage Ready Millennials FALHFA Annual Conference
July 13th, 2018

2. Agenda for Discussion Demographics Student loan debt
Mortgage ready population
Barriers to homeownership
Mortgage weak

3. Individual Demographics
Source: Freddie Mac calculations using anonymized credit bureau data for Sep 2016
Millennials tend to have lower income and lower credit scores compared to overall population.
The median student loan debt for Millennials is zero since majority do not have student debt.
African-Americans and Hispanics tend to be younger than overall population.
African-Americans, Millennials, and Hispanics tend to have lower income and lower credit scores compared to overall population.
CONFIDENTIAL

4. How Many Have Student Loans?
21% of Millennials have student loan debt.
The older Millennials have the largest percentage of student loans above $10,000.
Source: Freddie Mac calculations using anonymized credit bureau data for Sep 2016

5. What Do the 21% with Student Debt Look Like?
The median student loan debt for Millennials is $15,000.
Old Millennials have 20% percentage of loans that are more than $45,000.
Source: Freddie Mac calculations using anonymized credit bureau data for Sep 2016

6. How Much Does Student Loan Debt Matter for Millennial Mortgage Ownership?
Overall, student loan debt has negative impact on mortgage ownership rate.
A 10 percent increase in student loan debt-to-income ratio is associated with a 3 percentage point decrease in mortgage ownership rate.
A 10 percent increase in income is associated with a 31 percentage point increase in mortgage ownership rate.
A 10 percent increase in single-family house prices is associated with a 10 percentage point decrease in mortgage ownership rate.
For Millennials, the impact of student loan debt is similar to the general population.
Source: Freddie Mac calculations using anonymized credit bureau data for Sep 2016

7. What Is Our Definition of “Mortgage Ready” and “Mortgage Weak”?
“Mortgage Readiness” – definition based on research criteria not actual underwriting.
“Mortgage Ready”
FICO score greater than 620 and…
Total DTI ≤ 45%
No foreclosures in the past 84 months
No bankruptcies in the past 84 months
No severe delinquencies ( DPD) in the past 12 months
“Mortgage Weak”
FICO score less than 620 and/or …
Total DTI > 45%
Foreclosure in the past 84 months
Bankruptcy in the past 84 months
Severe delinquency ( DPD) in the past 12 months

8. How Many Are “Mortgage Ready”?
Total Population %
Millennial
“Mortgage Weak” 39 46
“Mortgage Ready” 35 40
Mortgage Owner 26 14
Of Millennials, 40% (8.9 million) are “mortgage ready”.
Another 46% are “mortgage weak”.
22,458,150
“Mortgage Ready” Millennials
92,432,400
“Mortgage Ready” Total Population
26,149,500
“Mortgage Weak” Millennials
104,788,150
“Mortgage Weak” Total Population
Source: Freddie Mac calculations using anonymized credit bureau data for Sep 2016

9. What Are the Demographics of the Millennial Population?
Age
Income
FICO
DTI %
All Debt
Total Population 48 64
719 9
4,818
Millennial Mortgage Owner 32 76
742 27
180,805
Millennial “Mortgage Ready” 51
720 6
7,833
Millennial “Mortgage Weak” 28 34
533 10
Source: Freddie Mac calculations using anonymized credit bureau data for Sep 2016
Millennial Mortgage Ready (MR) have lower incomes and higher debt compared to the total population.
Millennial MR have similar FICO as the overall population.

10. Where Are Millennial “Mortgage Ready” Individuals Located and Is It Affordable?
Source: Freddie Mac calculations using anonymized credit bureau data for Sep The affordable indices are obtained from Urban Institute.

11. Where Are Millennial “Mortgage Ready” Individuals Located and Can They Afford It?
Source: Freddie Mac calculations using anonymized credit bureau data for Sep 2016

12. How Can Down Payment Assistance Help the Millennial “Mortgage Ready”?
Household income needed to for qualify down payment assistance programs by MSAs (household size 4)
Source: Freddie Mac calculations using anonymized credit bureau data for Sep DPA income limits obtained from Down Payment Resource.

13. “Mortgage Ready” Millennials Meeting DPA Criteria
Note: Credit bureau data for Sep 2016 to investigate mortgage-ready millennials. Data combines anonymized individual credit bureau data with marketing data to obtain race/ethnicity associated with each individual. a. Calculates the weighted count of the millennials in the metro area that are mortgage-ready and meet the DPA criteria. b. Calculates the percentage of total population with credits in the metro area that are mortgage-ready and meet the DPA criteria. c. Calculates the percentage of the millennials in the metro area that are mortgage-ready. d. Calculates the percentage of the millennials in the metro area that are mortgage-ready and meet the DPA criteria. e. Calculates the percentage of mortgage-ready millennials meeting the DPA criteria in the metro area that are of Hispanic ethnicity. f. Calculates the percentage of mortgage-ready millennials meeting the DPA criteria in the metro area that are of African American race.
In the Tampa – St. Petersburg MSA area, 7% of “mortgage ready” Millennials meet DPA and 21% of “mortgage ready” Millennials meeting DPA are Hispanic.

14. Where Is Adequate Housing Stock - March 2018?
Looking at the March 2018 time period, there is an overall shortage of housing.
Decrease in housing supply will increase home prices, further reducing affordability.
Note: Housing Stock Indicator = for-sale inventory to existing-sale of homes ratio
Source: Freddie Mac calculations using data from Redfin.com for Mar 2018.

15. Where Is Adequate Housing Stock - May 2018?
Looking at May 2018, you see the housing shortage has further deteriorated since March 2018.
*Based on data from Redfin.com for May 2018 to investigate housing stock.

16. Zoom In: Where Is Adequate Housing Stock in Florida - May 2018?
Duval
Baker
Clay
St. Johns
Sumter
Lake
Volusia
Seminole
Pasco
Orange
Hills-Borough
Osceola
Pinellass
Polk
St. Lucie
Manatee
Sarasota
Martin
Charlotte
Palm Beach
Lee
Broward
Collier
Miami - Dade
*Based on data from Redfin.com for May 2018 to investigate housing stock.

17. Based on the entire “Mortgage Ready” population
Zoom In: What Does Florida “Mortgage Readiness”, Affordability and Housing Stock Look Like?
Based on the entire “Mortgage Ready” population
State of Florida
Share of MR population = 35%
% can afford a SF = 79%
% can afford a condo = 88%
Housing Stock = 2.8%
Note: The Housing Stock data is from Redfin.com for the month of May Credit bureau data for Sep 2016 to investigate mortgage ready. Calculations based on 10% down, 4% interest rate, 30 year mortgage and Freddie’s House Value estimator.

18. Share of MR population = 38%
Zoom In: What Does Miami “Mortgage Readiness”, Affordability and Housing Stock Look like?
Miami MSA
Share of MR population = 38%
% can afford a SF = 51%
% can afford a condo = 78%
Housing Stock = 7.7%
Note: The Housing Stock data is from Redfin.com for the month of April Industry rule of thumb is if inventory/sales < 6 then housing is tight. Credit Bureau data for Sep 2016 to investigate mortgage ready. Calculations based on 10% down, 4% interest rate, 30 year mortgage and Freddie’s House Value estimator.

19. What Do “Mortgage Weak” Millennial Populations Look Like?
 Weak Credit Concerns
Percent
Count
Severe Delinquency Measures:
Bankruptcy, Foreclosure, Delinquency 15
76,046
D90 in Last 12 Months 58
302,544
D60 in Last 12 Months 2
8,768
DTI > 45
844
Thin File (2 or Fewer) 22
116,792
No FICO
353
Otherwise Low FICO 3
17,643
Total Mortgage Ready Weak
100
73% of “Mortgage Weak” Millennials have had a delinquency of days in the past year.
22% of “Mortgage Weak” Millennials have thin files with clean credit records.
Source: Freddie Mac calculations using anonymized credit bureau data for Sep 2016

20. Who Are the “Mortgage Weak”…Are They Ready?
Thin Files
22% of Millennials are “Mortgage Weak”
Have no severe delinquencies
A DTI less than 45
No credit score
The Path Forward
Savings
Credit Risk Alternatives
Credit Used As A Tool
Delinquencies
15% have a bankruptcy, foreclosure, or recent severe delinquency
60% of “Mortgage Weak” have a 60 or 90 day delinquency
Source: Freddie Mac calculations using anonymized credit bureau data for Sep 2016

21. What Are the Short, Medium, and Long Term Opportunities for Millennials?
Short Term
“Mortgage Ready” Population
Target cities based on adequate housing stock with “Mortgage Ready” populations
Medium Term
Thin Files Population
Alternative Credit
Bank Statements
Credit Education
Long Term
Credit Concerns Population
Counseling
Borrower Help Centers
CreditSmart
CONFIDENTIAL

22. Affordable Lending Analytics and Research Director
Questions?
Thank You
from your presenter?
Cindy Waldron -
Affordable Lending Analytics and Research Director