BORROWER OF THE FUTURE SM

Transcription

1 BORROWER OF THE FUTURE SM

2 Demographic, financial, technological and cultural forces are transforming America. They are fundamentally reshaping how people think of themselves, their families and their future. And yet, in the face of pervasive change, the idea of the American Dream persists: Opportunity. Independence. Prosperity. Pride. For many, one thing above all symbolizes the American Dream: Owning a home. At Freddie Mac, we believe that to serve the next generation of homeowners the Borrower of the Future our industry must rededicate itself to understanding their hopes and fears, their characteristics and challenges. Freddie Mac examines macro trends, market intelligence, borrower journeys and more. We then share our insights with our lender partners. After all, just as we share the American Dream, we also share responsibility for making it possible.

3 A MORE DIVERSE NATION OF HOMEOWNERS America is becoming a more diverse nation, and our ideas about family, tradition and independence are becoming more diverse too. This is changing how the Borrowers of the Future think about homeownership. Optimism about homeownership is on the rise in minority communities. By 2020, more than 50% of first-time homebuyers will be Hispanic a notable statistic given that Hispanics are less than 20% of the U.S. population. And as America becomes a majorityminority nation, that may change our idea of what home means and who lives there. Consider multigenerational households: In 2016, 64 million Americans 20% of the U.S. population lived in households with at least three generations, for example, children, parents and grandparents. The multigenerational trend is rising among all ethnic groups with Asians (29%) and Hispanics (27%) leading the way.

4 NEW IDEAS ABOUT SHARING, OWNERSHIP AND WORK While people still look forward to becoming homeowners, the concept of ownership is changing. Services like Uber and Zipcar show the value of as-needed, on-demand access to transportation rather than owning a car. Businesses such as Airbnb show how homeowners are commercializing the most valuable asset they own. At the same time, the nature of employment is changing, with more workers self-employed and working as contractors. The gig economy has challenged lenders attempting to evaluate the creditworthiness of prospective borrowers who may be financially qualified for a loan but don t have a W2. By 2020, some 43% of the labor force will be engaged in some form of self-employment as fewer workers will be wage earners, either by choice or because of new business models. This is true in both high-paid industries like technology and the services sector.

5 IN AN ON- DEMAND WORLD, NO ONE WANTS TO WAIT The Borrowers of the Future have many qualities, but patience is not one of them. And it s no surprise: Everything from rides to meal delivery to entertainment to pet care services is available with tap-to-order ease. So waiting weeks for mortgage approval seems dated and confusing. Younger borrowers in particular expect a frictionless, digital-first experience and may be perplexed when asked to collect paperwork. Of course, digital-first is not the same as digital-only; the stereotype of the screenaddicted millennial fails to capture a more complex reality. According to the 2018 National Association of REALTORS Home Buyer and Seller Generational Trends study, 90% of millennial buyers purchased their home through a live real estate agent in The takeaway: Like generations of customers before them, the Borrowers of the Future want and expect things their way. It just happens that their way might mean a lot of different ways.

6 FACING UP TO THE DOWN PAYMENT CHALLENGE With many coming of age in the Great Recession and many more either immigrants or the children of immigrant families the Borrowers of the Future tend to have lower levels of accumulated savings. Federal Reserve data confirms that lower- and middle-income renters have less accumulated wealth today than prior generations, making it difficult to afford a traditional 20% down payment, particularly in overheated real estate markets. And many are unaware of the existence of low down payment mortgage options that they might qualify for. Add to that the effects of massive student debt $1.4 trillion and counting along with a lack of credit history and a distrust of financial institutions. The result is a situation in which an entire generation finds itself stretched to make a down payment on a home.

7 A DECLARATION OF (CONTINUED) INDEPENDENCE Baby boomers are aging in place specifically, in their own place. Some are relocating for purposes of downsizing (for economic or environmental reasons) or perhaps to live closer to family. But more so than their predecessors, boomers are not embracing the retirement lifestyle stereotype. Instead, they are staying in their own homes and renovating and remodeling to add safety and convenience features. For example: Converting a child s former bedroom into a home office, adding a walk-in shower or home stair-lift or remodeling to reduce time spent on upkeep. Aging in place contributes to the low levels of available housing inventory. And just like in the workplace where boomers remaining in their jobs effectively blocks more junior workers from advancing boomers staying in their homes contributes to a lack of available housing that reduces mobility and inflates prices in high-demand markets.

8 At Freddie Mac, our mission is to bring innovation to housing finance and put people in homes they can afford to keep. We use big data and advanced analytics to identify the key drivers of the housing market, then share insights and financing solutions with our lender partners to help them serve their clients needs: Low Down Payment Solutions Freddie Mac offers Home Possible and HomeOne Mortgages SM to help you help borrowers with high LTV/ low down payment mortgages as low as 3% down for qualified borrowers. A Better Way to Help Self-Employed Borrowers Freddie Mac is teaming up with fintech company LoanBeam to make it easier for lenders to evaluate the income of self-employed borrowers. Mortgages with Less Paper emortgages (mortgages with an electronic promissory note) and other electronic closing documents help speed the mortgage lending process. CreditSmart Financial Education CreditSmart, Freddie Mac s multilingual financial education curriculum, is designed to help consumers build and maintain better credit, make sound financial decisions, and understand the steps to sustainable homeownership. If you could see the future, what would you want to know? Since 1970, we ve made home possible nearly 77 million times. Freddie Mac has a unique perspective on the market and we re sharing useful, actionable insights about the Borrower of the Future. Help guide our research and tell us what you d like to learn more about as we continue to work and innovate for the borrowers of the future. Visit: BorrowersOfTheFuture.com

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