Charlie Wise, vice president of TransUnion’s innovative solutions group, acknowledged that if auto finance executives examine industry-wide data, it’s likely they will focus their attention on vehicle financing, watching metrics such as originations and delinquencies.

But Wise suggested that auto finance executives watch mortgage trends, too, based on findings from TransUnion’s latest project released on Thursday. TransUnion found that average daily auto originations are 84 percent higher in the 30 days after mortgage payoff compared to the 30 days prior to that event.

All told, TransUnion’s study showed that consumers applying for a new mortgage are on average two to three times more likely to open a new auto loan or credit card account over the next 12 months. In fact, many of these consumers open these accounts as soon as one month after their existing mortgage payoff.

“You wouldn’t normally think to look at mortgage attributes,” Wise told SubPrime Auto Finance News ahead of when TransUnion released this study. “But what we’ve seen is that act of applying for a mortgage triggers an inquiry on that person’s credit file and is visible to other lenders, including auto lenders.

“If an auto lender sees that inquiry on the consumer’s file, that means over the next several months that consumer is mostly likely to have that mortgage origination. What does that mean? It means that consumer, based on this data, is far more likely to open auto loans soon after. That might be a good time to market to those consumers because they’re much more likely to be in demand for auto loans.”

TransUnion’s study included 16.7 million consumers who paid off their mortgages and moved with new mortgages or refinanced their existing mortgages between Q1 2013 and Q2 2015.  Wise noted the timeframe for this project produced much different results as compared to studies completed based on data from the worst parts of the Great Recession as it’s commonly known.

“A lot of those studies we did pertained to consumers closing mortgages for less virtuous reasons,” Wise said. “There were a lot of consumers coming out of the recession who were having their homes foreclosed on or short sales or strategic defaults, less pleasant reasons for mortgages to close.

“What we’re seeing is kind of a return to what’s closer to normal activity in terms of that mortgage payoff and origination activity,” he continued. “We’re definitely seeing much more function in the mortgage market now so you’re seeing more consumers behaving at what I’ll call normal.”

And what might be considered normal is consumers delaying a vehicle purchase that would require financing until after their mortgage arrangements are closed.

“If you look at just the data, it’s difficult to see what’s actually going through the consumer's mind,” Wise said. “But we know anecdotally that many consumers when they’re talking with their mortgage lender or broker about a move or refinance, they’re coached to say, ‘Don’t open any new accounts between now and when your mortgage closes. We don’t want a lot of new accounts showing up that may adversely impact your credit score. Essentially, keep your nose clean until after that mortgage is completed.’”

But when that mortgage process is completed, Wise explained that auto finance companies can use that information to identify consumers who now might be looking for vehicle financing because they’re back in the demand stream for it.

And if the consumer refinanced their existing home, they might be an even better vehicle-financing prospect.

“When consumers refinance, they typically do that to lower their monthly payment and taking advantage of lower interest rates, whatever the reason,” Wise said. “A material drop in monthly mortgage payment means more cash flow you can use for your other obligations. It would not be unreasonable to think that consumer would have a slightly improved ability to pay on a new auto loans and other obligations.”

Wise recommended that auto finance companies could partner with their contemporaries in the mortgage space or work with credit bureaus that cover their footprint to mine for potential origination prospects.

“If you want to go to (consumers), this is a really interesting and we think pretty innovative way for auto lenders who want to identify more prospective borrowers,” Wise said.

All study findings were released Thursday at TransUnion’s Financial Services Summit in Chicago, attended by more than 300 financial executives from across the globe.

“Our research found that consumers either purchasing new homes or re-financing their mortgage loans are far more likely to open a new auto loan or credit card soon after this major life event, many within one month,” said Ezra Becker, co-author of the study and senior vice president of research and consulting for TransUnion.

“This finding is important, both because it quantitatively confirms the conventional wisdom and because it illustrates how necessary it is to look across products to get the full picture of consumer credit behavior,” Becker continued.

“Clearly consumers who are planning to move or refinance their mortgage wait until after that event to seek new credit, but once that new mortgage event occurs, their demand far outstrips the overall population,” he went on to say in a press release from TransUnion. “This information is particularly valuable for lenders who are seeking credit-active consumers with higher demand for new credit cards and auto loans; this population is much more likely to respond to new offers, making them an attractive segment that lenders can now identify.”

For more insights on TransUnion’s study and additional information on how lenders can use this information, visit www.transunioninsights.com/mortgageimpact.