Before a lender enters a market, it needs to gauge the size of the business opportunity. An accurate understanding of historical loan production in each metro area, county, state, city and even census tract can help size the opportunity and the amount or location of resources needed to seize it. All of this is available in the HMDA data.

Scenario

Let’s say a lender is thinking about promoting a new home improvement loan (HIL) product in Gary, Indiana. Some questions the lender may seek answers to are as follows:

  • What’s the trended demand for HILs in the Gary?
  • What lenders are already making HILs in Gary, IN and are there clues to how a new entrant can gain market share?
  • What’s the average loan size to be expected?
  • Is this a conventional or government-dominated market?
  • Are there any obvious opportunities with certain population segments in Gary, a city that is 85% African American?

The answers to these questions are quickly obtained by running a few reports in LendingPatterns™.  Keep in mind that whenever you are “sizing the market” you want to have “All Lenders” selected in step 2.   Select the Charts and Maps button in Step 3.  Then pick the Chart Market Overview report.  In Step 4 pick the MSA for Gary, IN.  To isolate the market for a specific type of loan use the filters in step 6 to limit activity, in this case, to Loan Purpose: Home Improvement, Action: Originated and Property Type: 1-4 family and Manufactured. 

Run this report and the Lender’s HMDA  overview report for the market and then you can answer all the questions above and more.  I would also recommend drilling down on disparity and spread pricing reports to see if there are strategic positioning opportunities.  Check out the screen shots below and see if you can answer the research questions.

Table 1: Distribution of Home Improvement Loans by Loan Type in Gary, IN (2017)