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Q3 U.S. Economic and Credit Trends FAQ

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Q3 U.S. Economic and Credit Trends FAQ 1. What percent of auto lending is indirect for new and used? a. Over 85% of new cars are financed and just over half, roughly 50-55%, of used car purchases are financed. We can't distinguish in our data whether a loan or lease is direct or indirect. Captives exclusively do indirect lending. However, banks and credit unions, for example, often do both types. Other sources suggest that the majority of auto lending is indirect, possibly as many as three out of four financed vehicles. 2. What is a monoline? a. Monolines are finance companies that only do auto loans. Independent finance companies also do other lending in addition to auto loans . 3. Does 'dealer finance' refer to buy-here-pay-here dealers? a. Buy-here-pay-here dealers, when they report to us, are considered 'dealer finance.' However, the category is dominated by other lenders associated with specific dealers or used car dealership chains. 4. Please explain Captiveā€¦ a. Captive auto finance refers to the financing arms of the auto brands, such as Ford Motor Credit Company or Chrysler Financial. They do indirect car financing for the specific brands offered by the parent company. They are beholden to the brand in that their actions affect brand reputation, and the brand may influence campaigns and special interest-rate incentives, which makes them act differently than both banks and other finance companies. 5. What is HELOC recast? a. Recast occurs at the end of draw period, when a HELOC changes from being an interest-only loan to being a fully amortizing loan. Borrowers may see an increase in payment at recast due to the interest rate reset and amortization of the outstanding balance for the draw period. Many lenders have since shortened the draw period, and many of the new HELOCs don't have an interest only-period, but require fully amortizing payments over the draw period as well. 6. Do we have a breakdown on which delinquencies are true Credit Risk vs First Party Fraud or Synthetic ID Fraud? a. We don't. In our consumer credit data, we would see if the servicer reports delinquency, but they don't report a reason for that delinquency. If it is determined that the account was associated with fraud, then the servicer would not only cease reporting that account to us, but we would get notified that the fraudulent activity on the account should not be reported and to remove the information from the consumer report. However, through our fraud solutions we work with the lenders to determine in-house what has happened so that they can take appropriate action to mitigate the incidence of fraud. 7. So, not much real change over the last two quarters in spite of the new administration, Brexit, etc. What's it going to take to see a real bump in the economy? a. The market is still steady as she goes, in anticipation of more regulatory loosening and potential infrastructure spending promised by the new administration. However, we think that the risks are more to the downside because there are still many hurdles. We have a budget that we still have to get passed, and not much time to do it in. The debt ceiling, of course, hasn't been addressed, although Mr. McConnell did say there is "zero chance" that the U.S. would fail to raise the federal debt ceiling. We don't know if that's permanently or temporarily, but we certainly hope he's correct on that

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