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70 the "glass half full" view is that there is still more opportunity here to be realized. 4) Tight Housing Supply—Redfin reported that throughout 2018, months of housing supply remained at post-crisis lows of less than four months, with the average days on market below 50. 5) Household Income at New Highs—Per the U.S. Census Bureau, median household income rose 1.8 percent in 2017 to its highest level of $61,372. 6) All-Time Low Mortgage Rates—According to the St. Louis Fed, between 2012 and 2018, 30-year fixed mortgage rates hit lifetime lows well under 4 percent, dropping as low as 3.30 percent in 2013. 7) Lifetime High Home Equity—Home equity in the U.S. has increased from the pre-crisis peak in 2006 by 13 percent and is up four times from the 2009 post-crisis low to $5.8 trillion of tappable equity. 8) Highest Level of Household Debt/Lower Debt-to-Income Rates—U.S. household debt stood at $13.5 trillion as of Q4 2018, higher than the previous peak of $12.68 trillion in Q3 2008. However, the debt-to-income ratio remains below crisis/recession levels. 9) Credit Quality, Non-Agency Securities, Subprime—As of the end of 2018, the average FICO score hit a new high of 704 from a low 686 in 2009. Leading up to the crisis, issuance of private-label mortgage-backed securities had reached levels of over $1 trillion a year. Since 2008, the biggest single year was $40 billion in 2017, of which $33 billion was subprime. 10) Mortgage Delinquency Rates at 11-Year Low—Nationally, 4.1 percent of mortgages were in some stage of delinquency (30 days or more past due, including those in foreclosure) in October 2018, representing a 1 percentage point decline in the overall delinquency rate year-over- year (YOY). Another sign of healthy post-crisis growth is that the housing market has become a smaller part of the overall economy. According to Deutsche Bank Chief Economist Torsten Slok, housing accounts for 4 percent of GDP today, down from 6.75 percent before the crisis, in part because of the supply and pent-up demand. Hous- ing starts still remain below the level of the 1960s, when the population of the U.S. was less than 60 percent of what it is today. is demonstrates a safety net and points to a new normal. Median household income has also seen 12 percent growth since hit the post-crisis low in 2012. THE BALANCING ACT Taking all the above data points into consid- eration, there appear to be several compensating factors that will continue to balance each other out. Home prices should gradually start to slow, housing starts will continue a gradual upward glide path to normalized levels, and, hopefully, we will continue to see increased wage growth that enables first-time homebuyers to continue to outpace repeat buyers. I foresee more of a "soft landing," with the potential for stagnation and pockets where new construction has outpaced demand. I believe we will experience moderate to modest declines in values as interest rates continue to rise. How will all of this impact the way financial institutions and servicers plan and invest for the digital age of servicing? We can't forget the rapid pace of digital change the U.S. has experienced post-crisis. e way the world interacts with each other was forever changed when Apple introduced something called the "App Store," ushering in a whole new era of civilization. Understanding how the macro environment has changed is imperative before considering the next step of breaking down how the customer has evolved over the last 11 years. We can divide the new homeowner into two major groups: e first-time homebuyer—Since 83 percent of the market is held by FHA, FICO on average runs 15 points lower. ese homebuyers will be higher loan-to-value and lower income on average when comparing the GSE product. It's important to distinguish that the risk here is unique. FHA currently has a serious delinquency (SDQ ) rate of over 4 percent, while both GSEs have SDQ rates under 1 percent. Repeat homebuyers (RHB)—ere may not have ever been a time in history where this segment would be considered as resilient as they are today. Record untapped equity, At its peak, the market was inflated with bad loans and overstretched homeowners. Affordability is without a doubt an inhibitor today, particularly with millennials, but the "glass half full" view is that there is still more opportunity here to be realized.

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