CoreLogic, INC. (NYSE:CLGX)
2013 Investor Day Conference
May 16, 2013 1:00 pm ET
Anand K. Nallathambi - Chief Executive Officer, President, Director and Member of Acquisition Committee
Frank D. Martell - Chief Financial Officer
George S. Livermore - Executive Vice President of Global Sales and Client Strategy
Susan Allen - Vice President of Strategic Relationships
Barry M. Sando - Executive Vice President for the Mortgage Origination Services and Default Services Segments
Arlene Hyde - Senior Vice President of Strategic Relationships For Business and Information Services
Brandon Burke Dobell - William Blair & Company L.L.C., Research Division
Darrin D. Peller - Barclays Capital, Research Division
Lauren Slabaugh - Stephens Inc., Research Division
All right. Good morning -- afternoon. Welcome to the CoreLogic 2013 Investor Day. I'm Dan Smith, in charge of IR for the company. This our first investor day since our spin at 2010. And as you'll hear from management team today, we had a busy 3 years, as many of you would know. We've refined the business mix, we've improved our operational efficiency and cost efficiency, we've increased our market share in key businesses, and we delivered strong shareholder value through earnings and return of capital and share repurchases. Main point today is CoreLogic has a solid growth strategy, we've identified the engines of future growth and we're taking decisive steps towards securing a strong, profitable and growing future. Through the focus strategic growth plan, our close to drive cost savings and technology transformation initiatives, we think that we are in good position to deliver continued satisfaction to our customers with industry leading data, analytics and workflow solutions, and we see a clear path towards meaningful growth in the future.
As we discussed, we expect to use the funds from our free cash flow from operations to reinvest in the business for future growth, while at the same time, returning capital mostly via share repurchases. So this will be a great and informative day for you. And then from a disclosure perspective, I'll just make a couple of points. First, we posted our slide presentation on the web, which includes additional details and reconciliations to non-GAAP measures. Second, we may make forward-looking statements during today's presentation which are in the context of federal securities laws concerning our expected business and operational plans, and acquisition and growth strategies and expectations for industry conditions. And all these statements are subject to unknown risks and uncertainties that could cause results to be different than the material from those described in the forward-looking statements. Thanks. With that, we've got a brief video, and then we'll turn it over to Anand Nallathambi, our President and CEO.
Anand K. Nallathambi
Good afternoon. Welcome to our second investor day. The first one was on May 10th of 2010 when we just went out, and we've been busy over the last 3 years, and so we're excited to talk to you today and brief you on how we are repositioning the company for the future. You heard from Frank and I and you hear from us regularly on the quarterly earnings call, so we'll keep our comments brief today. But today is about giving you a deeper dive into our operations and to give you how we have transformed the business and how we're repositioned for the future. I'm excited to have our executive team here presenting to you today. I'll give a very brief introduction to the people so you can get -- put it in some context.
After me, it will be Frank Martell. In addition to -- all of you know him. And in addition to being our Chief Financial Officer, Frank is a key architect in transforming our vision into operational strategies. He also plays a critical role in shepherding our operational strategies to make sure they stay within the confines of prudent financial metrics. After Frank, we'll have George Livermore, I don't need to necessarily go through all the order, I'll just say George Livermore and Barry Sando, they are 20-plus veterans in the business and they've been with CoreLogic for a long time. And they will talk to you about different things. George more on the growth initiatives and in our alignment towards client engagement and putting everything that we have across products into closer view with our customers. Barry will talk about our high scale, high operating leverage businesses that our market leaders in their industry, and over the last 2 years, in a very transaction-rich, refi environment, his margins had been really growing, and he'll talk to the transformation that he is doing to continue that path and continue to gain further margins and profitability.
After them, I want to also recognize Arlene Hyde and Susan Allen, these are practitioners in mortgage banking, they've been with major mortgage banking companies. We're glad to have them because they bridge the gap between where we have as far as data provision and all the analytics and stuff. And they bring the client perspective and identify that -- identify the new pinpoints that the customers have with all the evolving and changing regulatory environment and several products, the proper way, to enable the deep embedment that we are going to talk about throughout our presentations today. Then we'll have Jay Kingsley come in and talk about -- he leads our geospatial solutions group, and he is going to be talking about our significant diversification to date. And that's our foray into insurance underwriting and also in the energy verticals. In addition to the diversification into adjacent markets, the one important thing about geospatial is it's a testament and a great example of our competency that started as an outgrowth of our operational excellence initiatives coming out of the flood data services operation. So you could kind of see how through what we do sometimes, we find areas of interest that we can carry across and monetize those things into adjacent verticals.
Last but certainly not the least is Dr. Mark Fleming, our Chief Economist, he's the public face for our CoreLogic insights, and Mark's group is responsible for converting our data points into industry forecast, especially on home price depreciation, valuation and housing economic trends. So that's the lineup today. Let's get into my piece of it.
I want to just give a little bit of a perspective on what makes our firm unique. What's our unique value proposition? We want to talk about the business model that has been transformed to produced sustainable growth and profitability over the last 36 months. We'll provide you a little bit with the market context and our position as the preferred choice of underwriting and risk management support to the financial services industry. And we'll also talk a little bit about the strategic pillars for longer-term growth and shareholder value creation.
Here's the new CoreLogic. We're a much different company today than we were in 2010 when we became a stand-alone public company. Over the last 3 years, we have streamlined our top -- portfolio mix, we engineered our operations to fit the evolving mortgage environment and repositioned the company for future growth. We have transformed the company with a concentrated focus on Data and Analytics and in growing mortgage services that have high operating leverage. Our operational model is now more nimble and it leverages strategic partners, consolidated and centralized infrastructures, and simply put, all of this leads to, we are the leading provider of must-have data, analytics and services in the U.S. and Australia, and we are the leader by a big margin.
What's our unique value proposition? Unparalleled data assets, comprehensive covers and property data that's hard to replicate resulting in significant barriers to entry. You will hear that through Susan Allen's presentation and also Arlene Hyde's and Jay Kingsley's. We provide best-in-class services, evidenced by the size and scale of our mortgage services. Barry will hit up on them and he'll also talk about the future transformation plans that he's got to continue that growth. We are the preferred provider of risk management services to the market makers in the financial services industry, and we're taking that competency to adjacent verticals. Our new operational infrastructure provides us with the elasticity to produce sustainable financial results in the new normal mortgage environment. Obviously, 2012 and '13 have been really good mortgage years but we think we are ahead of the curve and we are prepared and well positioned the company to produce sustainable results going into the trough years that everybody expects in the mortgage industry. To supplement that ability will also be our diversification efforts that you will hear about today.
Putting our data, analytics and mortgage leadership through partnering with our blue chip client base, we are poised for continued growth in our existing markets and expand into adjacent verticals.
I'll quickly hit CoreLogic operating segments. These 3 are the operating segments that we report through today. In Data and Analytics, we are much more than a service bureau of data. The focus is in growing analytics, advisory services and also in diversifying into geospatial solutions. In Mortgage Origination Services, our growth rate is a testament to our client relationships and the best-in-class nature of our services. While we outpace the market in a transaction-rich refinance environment, we also know that the market makers, our clients, tend to retain share better in a declining transaction environment. This bodes well for us, especially in the coming years. In AMPS, we're assisting major clients in managing their servicing needs, addressing key regulations like QM, and the new CFPB guidelines.
On the competitive advantages, our guys are going to be talking about it throughout their presentation. I'll quickly hit it. In Data and Analytics, as we always talk about it and we'll say it again, the breadth, depth and currency of our property and consumer database is a huge competitive advantage. This competency that we have, has been honed and grown since 1959, some 50-plus years. In Mortgage Origination Services, most of our service solutions are market leaders in their own domains. In our scale-oriented businesses, high automation rates drive operating leverage. In AMPS, we are an extension of our customers' operation. In a complex and evolving regulatory environment, we are the trusted partner for outsourced processing where we partner with clients to solve their key paying points. We have long-standing client relationships, some of them lasting over 25 years. As the flight to quality takes hold in the housing industry, our solutions are deeply embedded within our clients' operating environment. The foundation core for our company is the massive database of property data and mortgage data that powers mission-critical solutions in the real estate, mortgage and insurance, financial services and consumer industries. If you look at the various solutions, it becomes clear that we cover the entire lifecycle of a property and mortgage loan by the scale and comprehensive nature of our extended service solutions in almost all the different phases of lending. It should be noted that we also provide services to the investor and regulatory sides of the business. From a consumer standpoint, the flip side of it, from the time a consumer moves into a rental property, all the way to buying their home, upgrading and investing and protecting their investment, CoreLogic powers a lot of touch points in the homeownership continuum. We help make the process faster and more efficient for all our constituents. The consumers, realtors, lenders, insurance companies and regulatory agencies.
I talked about the touch points in the homeownership continuum. Here, you can see how we intend to leverage our current strength into future growth. The 2 boxes on the left deal with the different data layers. Our team will provide more color on these later. While you could find bits and pieces of many of the disparate sources of data, we have the ability to add the critical dimension of property valuation that brings new sense and new meaning to the whole way of how to manage risk and how to underwrite risk. This is a key value differentiator that separates us from our traditional competitors. We are the market leader in valuations. The 3 boxes on the right speaks to the data elements, the other data elements that CoreLogic has to supplement the traditional data providers. We have done a lot of tests where CoreLogic data provides a significant lift to what you could get outside anywhere in terms of undisclosed liens, in terms of deepness of the -- richness of the property records in terms of who's owning the loan, where the property has been and how is it going, where could it go. Depending upon the future economic trends, we can provide the added dimension that people need to properly underwrite risk. Suffice it to say, we have significant future growth opportunities across the property ecosystem.
We'll talk a little bit about the blueprint for the future. Leveraging from our current strengths, we have laid these out as our strategic pillars. Number one, grow Data and Analytics segment to -- greater than 50% of total revenues. These are pillars that we have talked about, so I'm just reiterating to it because it is the fundamental plan, blueprint for us for the future. We have made good progress on growing our Data and Analytics segment from about 30%, 33% of total revenue, today it's about 41%. It is our segment of focus for diversification of future growth. Scaling Mortgage Origination Services. We have done a lot, we gain share even now. Over the last couple of years, we have added on a lot of new customers and new products and new services. We believe we can grow in MLS and further improve margins and profitability. You will see our track record today in Barry's presentation. It's remarkable. Our unique data solutions and service competencies are applicable in insurance underwriting regulatory compliance and customer acquisition. That's where we intend to diversify and scale especially in the P&C and other markets. In terms of monetizing the data assets, we have an enterprise data management strategy, along with our technology transformation initiative, to put all the data points that we have across our enterprise at the forefront to enhance new product innovation. We have also reorganized internally our organization structure to make sure that we -- our client engagement is much deeper and our product management and delivery is that much closer to bring in the customer's perspective and to funnel these things out.
On implementing the roadmap, in terms of operational excellence and completing Project 30, I believe in the middle of 2011, when we ran out and we said, here's our plan and we have a plan of saving our cost savings target of about $100 million, people said, everybody said it's very hard to accomplish. I stand here today by the strength of the people that are in the room, supporting CoreLogic. Were at 87% of target. Well on our way, on track towards our goal of $100 million by the end of this year.
Finally, consistent capital is something that we've been very serious and we try to distill it all the way down into our organization about what -- how do we -- how we take shareholder value creation and long-term growth as a significant objective across the board. Our capital allocation strategy is based -- balanced on 3 objectives. Frank will talk in detail about it later. But simply, number one, investing in growth for future growth and profitability; returning capital to our shareholders; and the third one, managing debt.
To sum it up, CoreLogic is the market leader in property-centric, must-have data analytics and services. For the past 36 months, like I've said before, we have transformed CoreLogic in a higher-margin growth company. The resiliency that we have in terms of ups and downs of the market is remarkable now and it's been demonstrated over the last 7 quarters. Through our strategic pillars, we have also shown you the blueprint for the future and charting the course for our future. In an environment that calls for increased focus on compliance transparency and higher loan quality, CoreLogic is the industry's trusted partner, offering unique data and services with significant scale and operating leverage. We are deeply embedded with our clients' operations and you'll hear that over and over again because it's a consistent theme, that's what separates us from the competition. On that note, I'm glad that you're here. Thank you for coming. And I'd like to introduce, and let me bring up our Chief Financial Officer, Frank Martell.
Frank D. Martell
Thanks, Anand. Good afternoon, everyone. I appreciate your time today and your attention to and support of CoreLogic. It means a lot to the company and we're proud today to talk a little bit about the progress we make, making in the future, which I think is very, very bright for the company.
What I'm going to focus on today is our business transformation. We've been on this journey, as Anand mentioned, for the 35 months that we've been a separate public company now. I think we made a heck of a lot of progress, still ways to go and I'll talk about what we've accomplished and what we plan to do over the next year, and then the next couple of years. I'll talk a bit, just very, very briefly about 2012 in the context of how it's a barometer for the progress that we made on our transformative journey and I think how it sets the pick for our underlying financial performance and the financial characteristics of CoreLogic as a company. Then I'll focus the balance of my remarks today on our 2013 business plan, which is very much a continuation of our 2012 progress. And then talk the concluding remarks around the financial expectations for this year and as we go forward in the future.
The purpose of this slide is really to try -- it's a little bit of a busy slide but it tries to get everything on one piece of paper. Where have we been on our transformative journey as a company and where are we going? We spun out First American in the middle of 2010. 2010, '11 and '12 has been very much around focusing the company in our core operations. As Anand mentioned, those are operations that we believe have unique competitive advantages, either through data assets, through patent protected analytics or must-have services. As you know, the housing market, despite the trials and travails that we've had over the last 4, 5 years, is still a huge sandbox to play in. And CoreLogic, where we play, we want to be the best at what we do and we want to preserve our unique competitive advantages. So 2010 through '12 has been a lot of refocusing the company on our core operations, cutting costs, driving efficiency, improving cash flow, and I'll talk about the fruits of that effort in a minute.
As we head out into the next couple of years, we're going to be focused around 4 or 5 key elements and those are as follows: First, as Anand mentioned, one of the key platforms of the future is revenue mix and shifting our revenue mix towards data analytics and Mortgage Origination. We will grow our data analytics through our program to over 50% of our total revenue mix in the next couple of years. We've already demonstrated, if you dial back to 2009, the company has -- about 1/3 of our revenue is data analytics. Most recent quarter, it was 41%. So we're certainly trending in the right direction towards the 50% target.
Secondly, we will continue to scale and grow Mortgage Origination Services. These businesses have terrific market presence. They have a terrific client base. We continue to pick up shares, a testimony to the quality of our services, and our consistent delivery of high-quality products and services in the MOS segment. And that's an area that is highly cash flow generative and has great operating leverage characteristics and Barry will talk about that in more detail in a minute. From the -- third key element, going forward, is to grow and diversify into adjacent verticals. We can do that through our existing services and our existing Data and Analytics platforms. But also through the acquisition of new related Data and Analytics platforms in the future. And then last but not least, we're on the third year, as Anand mentioned, of Project 30. It's been a spectacular margin expander for the company. We're not finished yet, we still have a little bit of ways to go. But I want you to know that we continued to demonstrate Project 30 in everything we do, as you can see from your miniature book here. So we're always looking to save every penny as it relates to Project 30.
My speech is a little dry, so I have to try to put a little levity into it. And then I think, excitingly, on the Technology Transformation Initiative, I think that's an extension of Project 30, it's a very exciting cost reduction opportunity for CoreLogic. But in addition, it's a growth enabler, and I'll talk about that more in just a minute.
So I think we have a very focused go-forward plan that builds off of the success that we've enjoyed so far and will result in a higher performing growth company as we move forward.
Just real brief on '12. All of our segments grew on the top line, expanded margins and all of our segments outperformed their respective markets in terms of the volumes and their respective markets. We did expand our margins by 700 basis points to just under 29% on an adjusted EBITDA basis. About half of that margin expansion came by virtue of Project 30. We delivered $62 million of savings against a $60 million target. We launched, in the middle of the year, our Technology Transformation Initiative, which I'll talk about in a minute. We delivered record free cash flow and put that to work. We repurchased $10 million of our common shares and we reduced our debt by over $100 million. I think this is a great affirmation that we're on the right track from a transformative plan perspective and that our plans for 2013 build on this very solid foundation.
Just a little bit about the numbers in '12. So our revenue grew 17%, to just shy $1.6 billion year-over-year. Our adjusted EBITDA was up over 50% to $451 million. We expanded margins, as I just mentioned, 700 basis points. And our free cash flow was up over 3x from 2011 levels to just shy of $280 million. So a terrific financial result for the company and I think is very indicative of the financial capabilities that the operations are able to produce.
In terms of 2013, a lot of this should look familiar for anybody that follow the company and listen to our earnings calls. These themes are ones that we have been talking about for the last 7, 8 quarters now and are ones that we are intensifying and accelerating. From a '13 perspective, we're going to be focused on 6 major areas. The first one is growing our data analytics by double-digit rates, we're off to good start in that area and expect to achieve this objective in 2013. Secondly, we expect our MOS and our AMPS segment, our service segments, to continue to outperform their respective markets, much like they did in 2012. And we're off to good start there as well. Project 30, we're on the homestretch. We have a $20 million target. We're about 1/4 of the way there through the first quarter, so things look good there. I'll talk a little bit more about that in minute. The TTI, we'll progress it. We expect to achieve -- and back -- way back, as Anand mentioned, way back in 2011, we talked about a 30% EBITDA margin target as we exited 2013. Similar to Anand's comment, I think we had a few doubters that we could get there but we're right on track and we expect to achieve that exit run rate this year. And last but not least, we're committed to deliver over 50% of our adjusted EBITDA as free cash flow and continue to put that money to work to create shareholder value and to repurchase at least 5 million of our common shares, which we were well along the way after the first quarter.
Here's our 2013 financial performance. We grew the top line 11%. We expanded both operating margins and EBITDA margins by 130 basis points, approximately. We grew our free cash flow by 31%. Our net income by 18%, and our earnings per share on an adjusted basis by 41%. So much similar 2012, great financial results, proving that, I think, our operating plan is precisely the right plan for CoreLogic.
This slide, again, tries to put the future path to higher margins and a little bit of context around our revenue growth drivers and our cost drivers. You can see many of the key elements on both of these segments are what I just talked about. Most of the balance of the presentation today will focus on the growth element of this chart. What I will do in the conclusion of my remarks, we'll talk a little bit more about Technology Transformation and Project 30.
Specifically on Project 30, it was centered on 4 main areas. 80% of which are in the top 2, the shared services and technology optimization, and 20% in strategic sourcing and real estate. You can see the key focus areas in each of those blocks. Basically, in shared services and technology, it's about cost optimization, it's about organizational streamlining, reducing complexity and centralization and moving generally to first quartile performance in terms of cost benchmarking. Strategic sourcing, we're focusing on purchasing effectiveness and demand management. And on the real estate side, shrinking our footprint and reducing our leasing and facilities costs.
As Anand mentioned, we're -- as of the end of the year, we're 82% of the way. Now we're 87% of the way. So we're closing in on the $100 million target, and I believe that our $20 million target is reasonable and will be achieved in 2013.
An extension of Project 30 is the TGI. So on the technology front, it really falls into 2 main phases. And I think this is something that's not always understood in the market. So the first phase, which we're working on now, we kicked off the middle of last year, really focuses on infrastructure and transitioning our current infrastructure to a cloud-based environment that's provided by our partner, Dell Services. So over this year, the course of this year and next year, we're going to move all of our applications and platforms from our existing data centers in Texas and Southern California to a Dell-hosted cloud environment in upstate Washington so that beginning in 2015, we expect to save $35 million to $40 million per year in runrate cost savings based on our 2012 expense run rates. So this transition of our infrastructure should yield $35 million to $40 million in annual savings beginning in 2015. So very much a continuation of the savings profile that we saw in the initial phase of Project 30.
Importantly, as we exit this year and get into 2014, I think, excitingly, is the development of our next-generation technology platform and infrastructure. Once implemented, at the end of 2015 and into 2016, and rolled out, we expect this infrastructure to be a significant growth enabler for the company. Our NexGen platform will be built around a common data warehouse, a common aggregation engine and analytics engine with a one CoreLogic Internet portal as a delivery platform. And this will allow us to deliver our services and our data and our insights to more clients across the spectrum of all the adjacencies in our core markets, and Anand talked about earlier in his presentation. So the TTI has both a significant cost reduction element and a significant growth enable-ment element to it, and we're very excited about the prospects that it offers. We're well underway at this point, no major surprises. It is a complicated endeavor but one that we're managing very closely and we feel is a great value driver for the future.
Capital allocation, Anand alluded to it, so did Dan, so obviously it's top of mind for the company. We'll continue to pursue a very disciplined and balanced approach. In terms of reinvestment in the business, we'll talk about that more later and in terms of the areas of focus, Anand talked about it. But also we have to obviously fund our transformative initiatives like the TTI, so we will continue to fund those. We will continue to return capital to our shareholders. In the 35 months we've been in the public company, we have returned over $0.5 billion worth of share repurchases. Last year, was it was 10 million; this year, we've committed to at least 5 million shares. So if you take the 5 million, 10 million, that's 50 million of our common shares over the course of 2012 and '13 that will be repurchased. So we continue to be a significant return of capital as a matter of principle as a company.
And last but not least, we'll continue to maintain our debt levels within our targeted leverage ratios which is roughly 2 to 2.5 turns. And currently, we're well within that target and that will be a continuation.
On the M&A front, just a point of clarification, I talked about this in a number of conferences, as well as the last couple of earnings calls. We have a screen, we have a very disciplined approach. We will be looking at funding areas that can provide profitable and sustainable growth in our core operations. So it's all about residential property data and related data assets. It's analytics and modeling capabilities, spatial assets, and last but not least, assets that will allow us to build on our market leadership and scale in both the tax and flood business, which we expect to be highly financially accretive to the company.
So that's the areas that we'll be focused on from an M&A perspective. I think if you look at the 2 deals that CoreLogic has done, CDS Business Mapping in December of 2012, and most recently, Case-Shiller. They fall directly within these parameters and provide a useful template for what you may see in the future from an acquisition perspective.
I will conclude my remarks by just reaffirming our 2013 guidance is consistent with what we issued in January. You can see here, we expect the full year revenues to be $1.575 billion to $1.6 billion. Based on the midpoint of that range, that will be a compound growth rate of 9% since 2011, which is a very good one when you consider the macro -- continuum macro economic conditions that we are operating in. You can see all the key assumptions there in terms of origination volumes and market volumes and delinquent loans and foreclosures. We do expect to continue to grow, as I mentioned earlier, data analytics by double digits in 2013 and continue to drive the mix towards more of a richer D&A mix. From an adjusted EBITDA perspective, $460 million to $475 million. Again, the midpoint of the range we generate a compound growth rate since 2011 of 27%. Key here is Project 30, target achievement of $20 million. TTI investments spend at the same level of 2012, and then achievement of our revenue mix objectives that I mentioned earlier.
Adjusted earnings per share of $1.65 to $.175, at the midpoint of that guidance, that will be a 53% compound growth rate since 2011. That's based on an effective tax rate of 40% and the repurchase of at least 5 million of our common shares.
So I just like to wrap it up by just saying, we've had great success so far in refocusing the company, streamlining the company, being more efficient, raising the bar in every financial metric. The shift to D&A is ongoing and significant, as well as the growth in margins and MOS. Project 30 has been a home run for the company. TTI is an exciting future benefit in store for the company. I think our 2012 results validate the progress that we made and the potential for the future in terms of financial characteristics of our company. And we're very much focused in 2013 on building on that success and driving our business plan to generate revenue growth, margin expansion and cash flow generation, hitting our margin target of 30%, continue to drive the TTI and make sure this company is positioned for much success in the future. So with that, again, I'd like to thank everybody for your time, I know it's precious, and we appreciate your support of CoreLogic. And now I'd like to turn the floor over to George Livermore who'll really take you through a lot of the exciting growth initiatives that our company has in store in the next couple of years.
George S. Livermore
Thank you, Frank, and good afternoon. Our revenue growth -- let me hit the slide here and get you there. Our revenue growth plan at CoreLogic is very strongly supported by a really big competitive advantage we have in our Data and Analytics assets, and you're going to hear this again and again. You've heard it from Anand and Frank and will continue to hear it today because it's a major driver for our business. We're ranked #1 in that in just about every important measure that you can come up with against our competitors. The other big factor for us is our people. And you'll meet some of them today, Arlene Hyde, Susan Allen, Barry Sando, the whole group and more. We have some of the most experienced people in the entire industry. And a lot of people have been with us for many years and have incredibly viable knowledge on how our products work and how our clients operations utilize those products. We also have operational quality and scale that is pretty remarkable and, of course, Barry will go into a lot more of that. And then finally, and probably the most valuable of all is our long-standing and deep intimate client relationships. We've also identified and we're aggressively pursuing growth in our core markets. And this is growth that is going to come mainly by selling the products we currently have and through shared gains in those markets. We also have a lot of new product opportunities with those same clients. And in our emerging area is also, which Jay and others are going to cover, where our competencies and our scale offer really strong value proposition.
Our go-to-market function is organized around specific market verticals. We did this, launched this early this year, did a lot of planning and last year around it. It's really very different for most companies in our space. We focused on a number of verticals. First and foremost, we focused on mortgage finance, which is our largest vertical, then capital markets, government. We also have a vertical focused on specialty credit and insurance and real estate, and those are the key markets that make up our client base today. Our model here is very client-centric and vertical-centric. And our focus is across the entire value chain, very holistically addressing the client's needs on that basis. And the reason I wanted to emphasize that is it's an important distinction. Most of our competitors out there are still very focused on what we would call a product, product focused, sort of silo-based way of addressing a client's needs. And so we think that our engagement models a huge competitive advantage for us right now. Our client relationships we have in all of our primary verticals are very deep and long-standing, as I've said before, and you can see some of the metrics here. In real estate finance, we have very much embedded in the flow systems of all our largest and most influential clients. We are from real estate agents, we dominate the desktops and most of the real estate agents nationwide, providing them all of the systems and data, by the way, to run their MLS systems. Anytime you've gone out to look at a property or to sell your own property, 7x out of 10, the system that they're going to access when they go to do that and produce a report for you, it's going to be system that we support for them and the data -- within that system is data that we provide to them. Mortgage lenders, investors, mortgage back securities investors, the government regulatory agencies, all of us, all of those are touched by us in some way. And in fact, we believe that we touch nearly every mortgage in the market in some way. Whether it's in the transactional flows, which you hear a lot about these days, or whether it's in the stocks, we really have a big involvement in that. Certainly, the products that you hear about, our flood products, our valuation products, our fraud products, really address the transactional side. We also have an awful lot of stocks in the country. We monitor the portfolios of lenders, we monitor the value and performance of mortgage-backed securities. We do that on behalf of a lot of different clients and regulatory bodies. And we provide critical Data and Analytics for those folks, and a lot of services as well that compliment those Data and Analytics that drives a lot of operational efficiency and helps them to be a lot more profitable and competitive in their businesses.
In this slide, we're talking about our history of delivering unique insights. And with our business, it's really never been more profound than now. Really, with the global financial crisis and all the regulator scrutiny that's come on the marketplace, especially with all things real estate and mortgage, it's in tremendous demand, consumer satisfaction, data transparency, loan quality and really regulatory compliance when we pull our top clients in the U.S., those are the top imperatives, and we're helping them really make a difference there. And we do that by leveraging the assets we have and innovating ahead of the marketplace. And we've been first to market with some pretty well known things that I'm sure that many of you have heard off. For instance, we developed the term True Well TV[ph] , which is true to loan-to-value ratio, that's a patented process we have, we're actually monitoring the loan-to-value ratio on mortgage portfolios and assets across the entire marketplace. Pretty important distinction on that because before we really started taking the data, the dynamic data that we have and marrying it up with the valuation data, the transactional data valuation is to give a dynamic view of what the loan-to-value on any properties, a lot of that was modeled And as we found out in financial crisis, a lot of the modeled data was pretty old and pretty incorrect. So today, through LTV is a pretty important thing to embrace, if you are one of our clients.
Then's we also are the industry standard in identifying and monitoring shadow inventory. I think most people today have heard of shadow inventory. And in fact, that's the term that we actually invented as it relates to distressed properties in the marketplace. We were able to take our data that comes from, as I mentioned before, real estate agents, on the very front end, mortgage portfolios, servicing portfolios, and then the actual data that's recorded at recorders office [ph] that we go out and get ourselves to really give a full round-trip picture, if you will, of the complete inventory of distressed properties. And that's the term that's been referred to a lot, and really is a better way of looking at the marketplace, more accurate way of looking at the marketplace. You probably heard it from everyone from Ben Bernanke, the Treasury -- or the Fed Chairman, all the way to the Treasury even the White House themselves have referred to the shadow inventory.
Another area where we've been very innovative and ahead of the market is in Capital Markets. In capital markets, we were able to, and I'll give you example of one thing that we've done there that was pretty remarkable, and that is that anybody who has a background in fixed income or mortgage backed securities, do we have anybody? A few. And so typically those assets are modeled and you wait for a thing called the remic[ph] Report to give you us some idea of the cash flows coming in from the loans that feed those queue sips or those investments. Well, that's lagged information, and by the time you find out that there's not cash flow coming in or there is a default brewing, it's in some time -- in some cases, already too late. So what we're able to do with a lot of the data that we have is we go down to the ground level, the address level, the borrower level, the rooftop level, the loan level, and we can look at data that's recording every single day, events taking place in the neighborhood, credit events taking place on the borrower themselves, and immediately link that through a unique match key that we developed right to the cue sip[ph] . So now, if an investor wanted to, they can wait for the remill report so they can do their traditional analysis, but they can also look way ahead of that and see what's brewing in a particular area. Are defaults accelerating in a particular neighborhood? Does my borrower have some credit issues. Is the value of the property coming down in any way? All of these things, you can wait a lot more effectively around prepayment and default and come up with a better answer in terms of pricing and understanding the intrinsic value of the mortgage-backed security and we were the first to do that and we still have a pretty unique position in doing that.
And the last thing that I'm going to mention, is Susan Allen, who is going to be up after me, will talk to you a lot more detail about it, is that we were the first to create an industry, a mortgage fraud consortium. And also the market leading fraud tools that are associated with that, including one of our fraud tools which has a pattern recognition technology that we have patented, and the algorithms associated with that, today, run almost 80% of all the mortgages in the United States. And in the process of doing that, we've saved our clients hundreds of millions of dollars in hard losses that we've been able to measure and report on.
Data differentiators. So I've talked a lot about data because that's a big part of what we do. But let me talk a little bit about how we do it. So data aggregation, that process has been refined in our company, as Anand has mentioned, for more than 50 years. Without this, we're the most experienced data aggregators in the world, and that experience has given us a number of important attributes. First, our quality is unmatched in the industry today because it's been refined over that many decades. We have some pretty unique data entry processes, and techniques for performing double data entry, as well as statistical matching, and some things that allow us to collect data at a very high quality rate on a large scale and get it delivered to the clients faster than anybody else. Our operational scale is really what drives that. We operate all around the globe, 24/5, 365, and we're able to, through those processes, deliver this accurate information in the most timely way in the marketplace today.
The last thing is our geographic coverage and the depth of our transactional history is really unmatched. And the transactional history is incredibly important. We go out to all the county recorders and the county assessment and we literally collect every document that affects real property. Well, a lot of these are mortgaged documents. Some of them affect the ownership of the property. And what we're able to do is have more and more transactions so that when we build our models, we have the most accurate models in the market. Anybody in here who's spent any time developing models or analytics knows that the more records you have, the more events you can bring in to a model, the more accurate they tend to be. And that's one of the reasons why some of our mortgage fraud models and our valuation models, in particular, are some of the most -- accurate, if not the most accurate in the marketplace today.
So finishing up on our unique data assets, really no other company in the industry comes remotely close to the sheer number of unique data assets we have. Anand talked about that in his presentation and showed you some slides, this then brings together some of those. And the data advantage is really composed of some pretty important steps that did overlook sometimes. One is the aggregation of the data, and of course, our history is marked by decades of making a lot of acquisition and a lot of small regional companies that had developed really regional of category excellence in terms of the data that they collected. And we integrated a lot of those companies and their data sets into 1 very large database, ultimately giving us the deepest and broadest footprint that there is in the country today. And the footprint is there's #1 in client contributed data as well where our clients actually contribute data to us in the fraud consortium and the our servicing databases. And geographic coverage and historical depth, that is also number one. The second step we have to go through is once you got all this data to create the value is really linking it. And some of the most important insights we've ever come up with as a company is where we've linked these disparate data elements together, and to provide some unique view of -- it might be opportunity in some cases, it might be extreme risk in others, but linking these data elements and I give you an example of it before in our mortgage-backed securities world where we are able to link property data, consumer debt information, credit information, none of these had consistent linkages or keys, if you will. We created those unique keys to link those up and then provide correlations to the marketplace. And they're pretty valuable and again, like I said, they really give a more 360-degree view of these risks and opportunities that were before available.
And then the last step, and this one is the one that is absolutely the most overlooked, I think, by the marketplace, and that is taking this information and putting it through a delivery vehicle that allows the client to consume it the way they need to. It's one of the biggest challenges out there, we have some of the most mature products and some of the most widely-adopted products that are in the marketplace or delivery vehicles, if you want to call them, where we pump these information through, and some of them have some pretty well-known brand names. For example, realquest.com, go Google that, that is like the Bloomberg for property information out there, you're like every lender, appraiser, realty or broker, everybody's got that on their desktop. It's a very popular product. We have Loan Safe, we have ABM Select, True Standings, the folks in here that raised their hands that have done fixed income with mortgage-backed securities, know the name Long Performance, those are all products. And then most recently our acquired asset in Case-Shiller, very well known. Very well known, mature and widely used.
The other thing that we do, and Barry can allude to this, is we've taken a lot of the same unique data analytics and we've woven them through our operational services. So that's given us a big competitive advantage, not just on the margin but competitively in other ways in terms of delivering products to our clients and services to our clients. Not only the things that the clients would touch, but also making our back-office a lot more efficient. I think it's worth noting that our competitors today continue to wrangle with just step 1. That is collecting the data. And today, have very few products in linkages that they've made to be able to deliver the value. Not that they won't catch up someday, but I think it's important to note how mature we are in that process.
Our mortgage and real estate are our most mature verticals, we also believe there is significant upside in share gain opportunities for our current solutions all across the value chain of our current clients. And these include the kinds of things that we -- I'm talking about in this context, our customer acquisition and marketing, flood, credit, valuation, fraud, all the way through to a lot of the services on the back end, QC underwriting and servicing related outsource solutions. The government vertical, shown here, is a vertical that we've always had a presence but since the global financial crisis and increased regulatory attention we realized that it should probably be a lot bigger. And so we've recently increased our coverage there, hired some really key people, I would call them rock stars from both the government and regulatory world, as well as coming back and bringing a lot of our core data and analytics products to bear on some of the services that they need, which by the way are very similar to the same things that a mortgage lender might need. For example, default servicing. Some of the agents -- agencies like VA and others, they lend to agriculture department. They need to manage their properties, they need to be able to manage their loans and their volumes, we help them with that. You also have home-priced forecasting; or course, mortgage-backed securities analysis; and right-of-way as well as Jay will talk about catastrophic risk and of course the thing we hear about today, more than anything, is financial and regulatory oversight. We provide them a lot of information, a lot of analytics into those areas.
Of course, capital markets. I've already talked a bit about that. Really important vertical for us. We've had tremendous success there in helping our clients value home loaned transactions, perform due diligence prior to securitization, monitor prepayment and default risk across nonagency securities and we people are really positioned quite well here for when, and some people will say, "if," but when the nonagency market, private label market, returns again, which we think it will, we think that's a good part of a healthy economy and we're well-positioned for that.
The spatial bade in property casualty insurance vertical, I'm not going into too much detail on that because Jay's got a great, great show that you're going to love. That show's about all about what we do there, but it's a real profitable area, nice growing and one that adds a lot of value to the current clients.
And then finally, in our alternative credit businesses where we hold leading market positions in auto, specialty, finance and credit reporting, those are areas where we believe we can continue to create new insights and perform our same value and growth opportunity assessment and utilizing our data to increase the effectiveness of the activities across their respective value chains. And so from a leading customer acquisition, to onboarding, to the servicing and management of their investment portfolios, we really touch each one of those areas pretty significantly.
Our growth strategy's focused on several key verticals and client types. Our largest core mortgage lending market has significant opportunities storming through our shared gains with existing solutions, I mentioned that. We've also invested in specific go-to-market effort around the mid-market, what we call the mid-market, and these are mid-market mortgage lenders, what we would call online mortgage lenders, regional banks and credit unions. We're specially focused on today compliance related solutions and performing important compliance related advisory services and Arlene Hyde is going to go into a lot more detail on that for you. In addition, you're also looking at geospacial insurance; alternative credit, as I've mentioned before; and investing in certain international markets where in those markets that we have, usually with a partner or directly localizing that IP for that particular market as well as using some of our expertise in data aggregation to help those partners there or ourselves, if it's an area that we're in directly, perform some of the data aggregation effort there that is required to build those businesses.
And then over the next few slides, and we're going to more detail on some of these areas. On this slide, we've depicted the mortgage market in a little bit more detail and how we think about it. Each of these tiers, if you look horizontally, represents a tier of the mortgage market for us, Tier 1, our largest clients; Tier 2, what we're looking at has been the mid-market as I've described before; and of course, Tier 3 would be the mass market, which is thousands of other mortgage lenders across the company. Each of these tiers represents clients who, for the most part, have the same requirements in terms of their mortgage lending needs, and processing solutions, but they've got very, very different ways of consuming those solutions. And for the most part, different financial objectives. So with then considerable work analyzing these markets, and we think about the different client stratus in this way, and the slide outlines the size of each by some key industry metrics and we think our opportunity's pretty big in each strata, but I want to make sure you know that this is really built on just providing the products that we have today. It doesn't imply anything new, it doesn't imply any acquired assets or businesses, so we think there's considerable upside just selling what we have today into these marketplaces.
For the mid-market, we've launched an engagement team, with the mission of tayloring and delivering our solutions directly into it. And I don't know if many people know, but this mid-market and primarily the mid-market is responsible for more than 50% of all originations in 2012. The interesting thing is that most of those loans were then sold to the larger lenders in the United States. But because we've had, this is -- we've hit this point here, we have a very key strategy here, when you think about our business as a Data and Analytics company, we spent most of our time really developing relationships with the largest lenders in the country and getting our analytic and data solutions adopted quite widely by the largest lenders. Well, this is a key part of our strategy for the mid-market. Because if you go into the mid-market, they're going to need to use the same kinds of tools that those larger lenders are accustomed to when they originate. So for example, this is, for us, sort of a demand pull strategy where we get the larger lenders using our products very successfully, and then we go down into the mid-market and we're able to get the mid-market to adopt them more -- actually much faster because they need to run those same tools then to sell those loans back up to the larger lenders. Key thing, it's not only a testimonial, but in some cases, it's a direct requirement by the larger lenders who are buying those really strengthens our sales effort, also because we offer a full set of solutions to these smaller or what I would call medium-sized players in a much more convenient manner.
This slide gives you a little bit more detail on this marketplace. And we really think for a number of reasons listed here, including the adoption of Basel III and the fact that regional lending and banking in the United States is incredibly important to the U.S. consumer and to the U.S. economy, in general. And we think this is going to continue to be a growth market for us. We see strength there right now, Mortgage Origination, we think that's going to continue. We especially liked the market because we know that they'd prefer to purchase from a single company. These smaller players, they cannot afford to cobble together a lot of different provider services and do the technical integrations and manage that, it's a very cumbersome management process, so for a company like ours that can come in with a lot of services, that they require on the front end and even on the servicing side, and offer a solution, a single point of contact, and a good strong company to be able to help them implement that, we think that's a great value proposition. And that's why we think the mid-market is really a great growth opportunity for us.
Now I want to jump to our advisory business, and again, not to steal Arlene's thunder, but I'm going to give you some -- a little bit of background in this. First, we only started this business a few years ago. And we did it really in response to a lot of our clients on the mortgage lending side, asking for what you know what I would call help on an ad hoc basis. And a lot of it seems to stem from new regulations, new compliance-related activities that they had to address. And where our data, by the way, in analytics could really help them out. So what we did -- I'll give you some examples of this. For example, we started working in an area of what we would call loan file protection. And that is after the loan closes, there are a lot of documents that need to come together in the loan file. And in fact, some of them might sound small, but if some of those documents don't get recorded, the lender actually doesn't have an enforceable mortgage. In some cases, you've probably read before where even in the default process, not understanding what the status of the documents, your deed, your deed of trust was, really stopped the default from happening, and in fact, made a lot of headlines. So while this is a process, probably before the mortgage meltdown was really not viewed very, very as being very important. Now today, is more important than ever. And we have a very unique position in that because we record or go out and collect from the [indiscernible] recorders all the recorded documents so even more so than a title company with the best first place to go, to validate that an actual mortgage transaction took place. And so, for us, we do this on behalf of our clients, we'll monitor, we'll also produce the documents, record the documents, help them move servicing rights around and do a lot of the things related this post closing, file protection process that we refer to.
There are also a lot of other things that we do. We go a lot deeper with the banks, we help them evaluate their portfolios. For undisclosed liens, there's a -- the ALLL process, the allowances for liens losses and loans that takes place every quarter by our financial institution clients, we're an instrumental part of that. We go through and we help look in their portfolios for undisclosed liens that they didn't know about that might be on a property that they have to be able to report on. And so that's a pretty important process that's continuing for us, and that's something that we do, it's very unique. In addition to that, there's other compliance-related efficiency processes that we help provide them on the servicing and default side so that they can avoid costs, consumer complaints, borrower complaints and the penalties associated with not processing the distressed volumes that they have in the most effective way. We have a specialized team of industry experts, Arlene and Susan being 2 of those, who are part of our work here. And we've hired a lot of others with backgrounds in servicing, financial engineering, and trading desk backgrounds. And most of them have -- they have strong careers and what I would call, mortgage service and investor post closing. But it's on and so we matched that up with our data experts and our analytic expertise and all the processing capability we have, it's a pretty strong proposition for the clients. What we're really pleased with in this advisory businesses is that as we have these engagements in the clients, they'll come up with paying points, if you will, problems that we have -- that they have, and we can come up with a solution that is repeatable, we productionalize those solutions and then we redeploy those to other clients. And so I kind of refer to the advisory business as the breeding ground for a lot of our next new ideas and innovation.
Last, I'm going to talk about the geospatial and hazard risk area. And of course, I mentioned before, Jay is going to go into that a lot more detail but I wanted to make a couple of points with it. First, this started out as a very manual process with individuals pulling hard copy maps, looking at them, assessing risk for flood and other things. And as that industry evolved we were at the forefront of it, it has become a more automated, analytic and data-based environment. And over time, we've acquired a lot more data, developed a lot more technology and today, we really do deliver a more automated solution that gives a more comprehensive view of spatial risk. And we count a lot of the most, or a lot of the largest insurance companies in the U.S. and in government as our clients right now. And a point I'd like to make on this, is that while our focus is on growing the segment, growing insurance, growing spatial and developing the same kind of client intimacy that we have at other places, there is great crossover into our other businesses and I'll give you a perfect example of it. When Hurricane Sandy hit, which maybe here you're more familiar with than Dave and I, we were able to form our largest clients immediately append to their loan portfolios, the risk associated with storm surge, the hurricane damage zones and many other things, including valuation information, loan-to-value, whether that property was already in a distressed portfolio or not, or in a foreclosure process. And we were only company that could provide that information instantly back to those mortgage lenders to give them a very quick and important view into what their risk was associated with that catastrophe. This is a great example our where our data in one spot can come over in a completely different vertical and really add a lot of value. And that's key to what I've talked about this entire time, is linking these disparate data elements and creating a new value, all the time we're finding new opportunities to do that and this is one area where that stands out.
So in summary, I think we've got a great position. With some really unique must-have assets. We've got deeps, long-standing relationships with our clients in all of the most important verticals, we've really added to our talent pool with a lot of great individuals from the market, practitioners, as Anand referred to, who've come into our company and given us a lot better feel for how we can be more effective with our clients. And we've got a new and really redoubled focus on a client-centric and vertically focused go-to-market effort. And it's a model that, I think, is really promising, not only in our core client relationships, but also with our growth initiatives. And finally, we're really happy to see that the key indicators in the market are improving, and our major markets, as well as the U.S. economy, is really, seem to be back in recovery track. And as our Chief Economist, Mark Flemming, will reinforce, we're solidly in that recovery phase right now. I mean, all of these facts have us really bullish, not only on our future but also on how we'll do in 2013. And I'll thank you. And with that, I'd like to introduce you to Susan Allen, our Vice President of Market and Client Strategy.
Thank you, George. Good afternoon, welcome, and thank you for joining us today. I'm pleased to be here today to talk about our risk and analytical solution. I'm going to focus primarily on valuation and fraud.
Assuming I can figure out which way to point this. Okay. You've heard us talk about being a market leader in valuation risk and fraud analytics. I'll go into a little bit of detail on the unique data assets and the way we apply those in patented analytics in order to solidify that market-leading position. I'll also talk about how our solutions cover and extend beyond the mortgage industry and why that leads to doable revenue and new and emerging opportunities for us.
As I mentioned, I'm going to talk primarily about valuation and fraud in the mortgage industry. CoreLogic produces over 1 billion, with a B, property valuations each month. We license those to over 1,100 individual companies. It may be obvious to you why property valuations are relevant in capital markets, in mortgage, in insurance. It might be a little less obvious, but property valuation and risk management is also very relevant in credit cards. In fact, 4 of the largest credit issuers are among the 1,100 clients that we have. It's also obvious, when you think about it, that home improvement solution purveyors, product purveyors would want to know who's got equity in the house, who's got growing equity in order to refine their marketing efforts. Those are a few, I'm not going to read the whole list of 1,100 to you.
We're an industry-standard among top financial institutions. And Anand mentioned and we talk in our materials a lot about being a leader. I'm going to share with you, specifically in fraud and in valuations, in mortgage fraud and property valuations, we are the leading provider in the mortgage industry. Why is this relevant? Because the mortgage industry is a very entangled industry. Imagine you're a risk manager and you're about to be -- go through a regulatory examination. Are you going to want to approach that regulatory examination and explain why you're using the tools that nobody's ever heard of? When we've got hundreds of clients with experience who are using CoreLogic risk and fraud analytics with the support of their regulators.
Another key thing about being the leader in fraud and the leader in valuation, those are 2 intertwined risk disciplines. Some fraud is valuation fraud. In fact, mortgage fraud, with the -- in repurchase risk, with the valuation component, one of the most significantly increasing triggers that are hitting our clients and have been over the course of the last 2 years. But there's also fraud that's not related to mortgage, you can have occupancy fraud, you can have income fraud. And there's a valuation risk that Mark Fleming will address later, that actually has nothing to do with fraud, general market trends that are going on. But the most efficient organizations out there are those that have a common perspective on property valuation in both their valuation risk analytic program and their fraud program.
So I can share with you, 25 out of 25, all, of the nation's largest financial institutions rely on CoreLogic risk management solutions. The overwhelming majority of those rely on us for both. I also want to talk about the entanglement in terms of the mid-market. George was just talking about how the growth in the mid-market and how mid-market -- we talk about correspondent lending, this is what we're referring to, is that in the mid-market, some of the mid-market originators, their business model is to sell those loans to the larger Wells Fargos, Citis, Chases of the world. Well, that strategy, as George mentioned, the most efficient way to ensure that those loans are going to be sale-able to the larger organizations, is to use the same tool. If you know what test you're going to be given, right, then study the same test when you're doing your own process.
We had 47% revenue growth in our mortgage fraud analytics solution in 2012 that was driven in large part by 200 new clients, the vast majority of those were mid-market clients. So clearly, industry leadership drives advantages in the marketplace.
So now I want to talk about a little more detail, you've heard us talk about unique data, you've heard us talk about our modeling. Having unique data and blending that with patented models, leads to differentiation in the industry. Regardless of what you're trying to model, I don't care whether you're trying to model, whether you're trying to forecast the weather, you're trying to forecast property values. The data that you have to work with, the breadth of that data, the depth of that data, the applicability of that data to the problem that you're trying to solve, that defines how good your modeling can be, that's your ceiling. So by having solid data, we're actually able to produce better models. One critical aspect of our data program is our consortium data, George has mentioned in our fraud consortium. When I talk about consortium data, I'm speaking about an agreement where consortium data is actually contributed to us from our clients. So for example, in the fraud consortium data, fraud consortium data is a loan application data, along with the lender's tags of whether there's fraud, whether they identified misrepresentation, in that application, on the valuation side of the house, it's a complete valuation, same thing, along with the lender tag do they find misrepresentation there. And our contributed loan databases, we have full loan information, again contributed data from our clients about the performance of that loan. So every new client of a consortium-based product is not just a revenue opportunity, it actually grows the database. As you grow the database, your models gets better. As clients test you, more likely to pick you, grows the database, models gets better, it's a great cycle, it's a great cycle. We talked about these being unique solutions. Why are they unique? Because these databases didn't exist before CoreLogic put them together and they exist within CoreLogic. That's what we mean by unique. So we can talk about breadth of data, we can talk about depths of data, can talk about competitors trying to catch up in those spaces, but this unique data, especially given its relevance to our modeling approaches is really a strong advantage for us.
I also want to talk about our patented models. We aggressively manage our intellectual property. CoreLogic has 30 issued patents. We have 5 allowed patent applications, and we have over 50 patent applications pending. Now you know us as a company that licenses our data. You know we license our analytics. You may not know that we also have significant agreements for royalty payments to license our IP. That's a critical component for CoreLogic, unique data, patented models, differentiated solutions, differentiated based on their coverage, based on their accuracy.
You've heard us mention that CoreLogic solutions are fully integrated into the client workflow. So I'll talk for a minute about underwriting, I'll discuss 6 quick bullet point, quick boxes up here about the lifecycle of the mortgage. Specifically within underwriting, valuation and fraud analytics are just -- they're just required analytics for lenders to originate a mortgage. That's been true for a long time. However, many of the newer regulations cover -- require additional scrutiny in originations. CoreLogic's in a position to be able to create some wonderful hybrid of products. For example, a regulatory change prompted us to very quickly be able to create a hybrid solution that leveraged a field services inspection with patented valuation, with additional market data, additional listing data, that solution within its first year was adopted by 50 clients, it was really pretty astounding, the success of that type of product.
Mark Fleming is going to talk a little bit, in more detail, about collateral risk and some of the additional opportunities and underwriting. I'm not going to go through specifically the other 5 boxes, but I will touch one that may again not as quite as obviously to you as you think about property valuation and risk management, and that's prequalification. Many of our clients are finding terrific value in exposing their view of property valuation and collateral risk to their consumers through mobile applications, through websites, through their consumer facing applications. They're also finding it very valuable to expose that property valuation component very early in the application cycle, at prequalification. Imagine you're a loan officer and you're sitting across the table from somebody who's interested in doing a refinance transaction, and they tell you they think their house is worth $400,000.
Well, if you take their word for it, you're going to progress a long way and spend an awful lot of money and an awful lot of time, before you get an appraisal back at $350,000. And then you've got a problem. You spent a lot of time, you've got a disappointed customer. Now imagine that same loan officer at that initial conversation, being able to say, let me share with you some information on the market. Let me share with you some of the comparable sales that an appraiser is likely to look at. Let's talk about how to structure a transaction that makes sense for you.
You've turned something that otherwise might have been a very negative experience into something that's a much more positive experience with a loan officer's view to the trusted advisor. We help our clients do that.
But one of the things I'll mention is that if you're going to take that kind of approach, especially up front, you better be right, right? Accuracy is key. Lenders who adopt these types of policies want to make sure that the valuation they're using is highly accurate.
I'm going to talk about leadership through consortiums. Consortiums are key to fraud risk management, not just in fraud. This is a standard protocol for fraud risk management in credit cards, in health care, in telecom, why? Because it works. Fraud is a nonrandom event. So for those of you who are modeling, you'll understand that you take a different modeling approach when you're trying to model a nonrandom event than a random event. The best fuel for fraud models is consortium data. You've got to know what fraud looks like if you're going to try to isolate it in a model. So contributed data, with the full application along with the fraud tag, that's absolutely the best fuel for any consortium products out there.
So why doesn't everybody just build a consortium? Because they're very, very difficult to establish. You have to be a trusted partner to your clients. They are trusting you with stewardship of their data and that's a really, really big thing. So for CoreLogic, we have those deep relationships. We started at fraud consortium in 2009. I can share with you that our current consortium members, as George mentioned, represent 80% of mortgage originators. I'll also share with you that we have 100% retention rate. Every single lender who has ever joined the CoreLogic fraud consortium is still a member.
Our consortiums are not just the database. You don't hear lots of folks talk about user groups. We have consortium meetings. When we have a consortium meeting, we are in a closed-door session with those lenders who have trusted us to be stewards of that database. We need to talk about what they would like us to do with this database. It provides terrific support for the clients. They're able to -- for example, in the consortium meetings, they meet each other. Fraud -- there are often multiple loan and multi-lender fraud schemes. So it's relevant that the fraud leader at Bank A can pick up the phone and quickly call the fraud leader at Bank B because they've got an established relationship, they know one another, they're able to much more quickly address multiple fraud issues. When we meet with the consortium, they've asked us to do -- to create proprietary benchmarking. Where else could they go for benchmarking? You need consortium data in order to create a benchmarking solution.
They've also approached us for other solutions. We had a discussion about short sale fraud a couple of years ago, that inspired CoreLogic to go back and cook in the kitchen. Our most recently issued patent was actually around the short sale fraud.
So our fraud consortium meetings provide these meaningful insight to us. I'll be speaking on the next slide, our fraud consortium group was actually so effective at reducing fraud that when these valuation issue began to surface and surface more rapidly, they said to us hey, go build us a fraud -- I'm sorry, a valuation consortium to partner with us, the fraud consortium. So we launched our valuation consortium just last year, the 2 consortiums meet at the same time, they have a common track and then they have some separate tracks.
So here's an example of the solution of how we thought about that request from the consortium leaders to attack valuation risk. The fraud consortium leaders asked us a question. They said okay, we need better information on whether or not there's appraisal mix representation. Mark will go through an example a little bit later in his presentation but here, you're talking about fraud.
As we work further with the collateral risk, the valuation risk partners at our bank, they said you know what, there's a second component of this, a little bit less obvious, but it's around repurchase risk. Are there any material misrepresentations in this or any errors in this appraisal? What will happen for a lender if a loan goes bad, and that means it's gone bad because maybe the borrower lost their job or some reason that has nothing to do with the value of the property. The appraiser forgot to attach their digital signature, that's grounds for repurchase.
So the lenders, not only did we have to know how do we model actual valuation misrepresentation that produces loan-risk but how do we look within the appraisal and try to understand and identify these types of triggers that could trigger a repurchase risk? So what we did was we linked all these unique assets. We formed the valuation consortium, we have over 3 million contributed fields in that database, we combine -- we actually filed 2 new patent applications on some of these new ways to look at risks. We pulled our MLS data, we pulled our market data, we pulled our patented valuation data, along with the consortium data, created this new addition to the LoanSafe suite that focuses on appraisal management. And I can tell you, it's been very successful. Our first valuation consortium, very first meeting, 8 financial institutions representing over 50% of all mortgage originations. And if you think about this from a consortium standpoint, once there's one consortium, once there's an industry consortium there typically aren't -- there's typically not another one. That's a very, very difficult thing to shake loose. So we're really excited about the success of the valuation consortium, we're also excited about the success of this new solution. We have over $15 million in signed contracts with a very strong growth trajectory. This is also an example of, remember, I talked about in the underwriting space, that there's still opportunity to grow because of the changing regulation and the changing scrutiny that's required? This is what I mean by that. It's no longer sufficient to just look for 1 type of risk and look for it the old-fashioned way. You have to come up with new ways to look at it. Arlene and her presentation will go through an additional expansion of this. After we got done with this, we said hey, where else can we apply it within CoreLogic? So she'll be sharing with you some information on an application in the BPO space.
Key takeaways. We are the leader, market leader in mortgage fraud and property valuation risk analytics. Why? Because we have created unique, relevant, sustainable databases. We have built out of those databases, patented analytics, that's created a stable client base in mortgage, deeply embedded relationships with our clients so that we understand the kinds of solutions that they require. And we see a lot of room for growth in mortgage review solutions, industry benchmarking and other hybrid valuation products.
With that, I'd like to welcome to the podium, Jay Kingsley, Senior Vice President, to discuss spatial solutions.
Thank you, Susan. Good afternoon, everybody. My name is Jay Kingsley. I lead our Geospatial Solutions business for CoreLogic which is an exciting and growing part of our Data and Analytics segment. So I'm presenting to you today from the Conrad Hilton Hotel in New York with the address of 102 North End Avenue New York, New York 10282. But I think more importantly and more specifically, I'm presenting to you from inside of the digital personal boundary of this commercial property. It's at a latitude of 40.715 degrees and a 74.015 degree longitude at about a 20-foot elevation.
So with that information, I can report to you that we're about 2,252 feet from the nearest fire station. We're about 489 feet from the Hudson river, 3,945 feet from Upper New York bay, 309 feet from a FEMA 100-year flood zone. And using CoreLogic flood risk score, on a scale of 1 to 100, this property rates at about a 30, which is roughly a moderate risk.
I had someone who flew in from California yesterday. I'm happy to report that the wildfire risk on his property is extremely low. But I'm sure if we were to move our Investor Presentation next time to California, that equation would be flipped.
Now, it's important to drive home that point because some of the statistics that I just recited to you are a good frame of reference for what geospatial is and are really, a lot of the Data and the Analytics that our customers use and consume to manage our risk. So I'm excited today to talk to you about our geospatial business, what we think some of the growth opportunities are for that business and talk about how geospatial was born out of our flood business. Barry Sando will talk about that in a little more detail but this is an outgrowth of one of our core businesses. It's science-based. We have a science-based team that builds what I'll describe as locational accuracy and premium hazard data sets. We have a strong portfolio of customers and this business represents a real growth opportunity in adjacent markets for CoreLogic.
But first, let me spend a little bit of time. I want to again, reinforce the point of what is geospatial. So geospatial is an information technology that marries data with an actual point on the earth. With geospatial technology, we move beyond using an address, but instead, leverage a precise location with the latitude and longitude and elevation that allows us to base our analysis and this is important because it allows CoreLogic to align its core property data to a physical location and broaden to a new set of insights that are difficult to deliver, which just an address. So by adding geospatial capabilities to our data, we can provide better context and deliver answers about a property's proximity to another property or to other properties within a portfolio. We can provide better accuracy by linking multiple data sites to a point on the earth and using that unifying point to conduct an analysis across a number of things. And it also allows us and our clients to enhance their risk management capabilities by aligning property locations and information with Earth-based data, with natural hazard data. Natural hazards don't have an address so we need a way to unify those things and apply analytics to those.
Okay. So beginning in the -- I'm sorry, yes, beginning in the late 1990s and Barry I think, will go into this in more detail and George referenced it. CoreLogic began to automate its flood determination business in a process of digitizing the plat books, the transparencies, the physical paper maps that were used to manage a very manual business. Then by recognizing the value of this digital parcel data to drive automation, CoreLogic began to compile one of the leading national digital parcel databases.
So by 2007, we'd amassed more than 60 million digital parcels. And today, we maintain a database of more than 135 million locationally accurate digital parcel databases. We then coupled this with a proprietary and an innovative geocoding engine and with those parcels, use that as a foundation for premium hazard information where we've developed over 30 modeling geospatial data sets that have been created by our team of Ph.Ds, actuaries and scientists.
So this growing revenue opportunity for CoreLogic has really been our technology and our deep data expertise. And the business model that's illustrated here really enables the delivery of that spatial data to an expanding set of customers and verticals. The foundation of the business is rooted, as I just mentioned, in our geospatial technology and that digital parcel map that we have.
Using that as a foundation and a way to pinpoint the location on the Earth, we can then layer on top of and produce analytics around data and scoring and analytic modeling on property, hazard, tax and future information. This information, as you can see then, can be delivered through a number of delivery platforms, be it software integration with our customers, web services and APIs and also the risk meter platform, which is a new, fast paced platform targeted towards the insurance industry that was recently acquired through the acquisition of CDS Business Mapping. It's through these delivery capabilities that we're able to deliver solutions to customers and depending on the use case, deliver value to an ever-increasing set of industry verticals.
Today, we have over 700 customers within geospatial and deep relationships in the insurance industry and increasingly, in other verticals. In insurance, we have customer relationships across all levels of the industry, from Tier 1 P&C carriers through the mid-market and small carriers, we also have relationships with commercial carriers, reinsurers, brokers and agents. And within the Tier 1 segment, 9 of the top 10 P&C carriers are customers of CoreLogic.
Outside of insurance, we're partnering with many energy customers, particularly in oil and gas being the next biggest vertical within the geospatial business, partnering in helping their growth in domestic energy expansion.
5 years ago, this essentially was a brand-new business. As I mentioned, it was incubated out of one of our core businesses, our flood operations. But as our customer relationships have deepened and the breadth of our solutions have grown, our geospatial solutions business has experienced a 20% compound annual growth rate over the past 5 years. And now with the addition of the CDS business mapping acquisition, we are adding significantly to that revenue, but more importantly, I think with this acquisition and the risk meter platform, we're adding a new distribution capability and deeper penetration into the midtier P&C segment to grow our market share and fuel incremental growth opportunities.
The team managing this business and driving the growth opportunity for us have both technical depth and industry breadth. Backgrounds for our executive team have experience with companies like Allstate, Intel and actually NASA, as well as entrepreneurial success in the geospatial industry. We average more than 20 years of experience, either in the insurance, technology, locational intelligence or financial services industries. We have, as Susan mentioned, patents within the geospatial business. We have 5 issued patents, 6 patents pending and a number of R&D projects underway and this business is really deeply rooted in science. The team possesses Ph.Ds in geography, in hydrology, in Earth science, as well as we possess an actuarial staff that supports product development and sales efforts.
And in addition to this team and all of the talent in the science foundation that they have, CoreLogic and our scientists are frequently recognized as thought leaders in the industry. And as you can see up here in the slide, frequently cited in the news media, and industry publications for our insights.
So one of the key differentiators for the CoreLogic Geo Solutions business is the combination of CoreLogic's core property data records added to the premium geospatial hazard data sets that we have developed. The team develops over 30 mono-geospatial databases, as I mentioned and some of them are represented here. They represent things like storm surge, flood risk, wildfire risk, earthquake risk. These are the kinds of things that are typically used by insurance companies and insurance customers to manage their risk, to price more accurately, to improve their profitability. We also maintain geospatial data sets around tax, property parcels, municipal boundaries that are used by other customers and verticals, such as oil and gas companies to plan or manage a pipeline, or a utility company to ensure their tax compliance of their physical assets located within a municipal taxing district.
So to meet our customers' needs, all CoreLogic property borrower and hazard information can be spatially enabled to create a product, deliver a solution or meet a customer need. And as this graphic depicts, it begins with the locational accuracy. And then depending on the need, we can deliver a single return of core property data. We can deliver multiple layers of hazard data for them to consume or a modeled scoring information that uses proprietary algorithms to assess and quantify the risk. We also have the ability to deliver this and answer some millions of addresses per hour via web services or batch processing.
So now, what I'd like to do here, just a second is, I want to provide 3 brief use case of examples of how we deliver value in 3 different examples of customers. So what you're looking at right now is actually a map of the U.S. overlaid with what we call our single risk score.
So the single risk score takes all of our hazard databases and weighs them, each of those bases by the frequency and severity of that hazard. We then took an algorithm and created -- to score the weighted layers for each 30-meter grid cell across the country and then normalize that on a 1:100 scale. So this essentially provides an aggregated view of all risks, all hazard risks across the country that could be used for portfolio analysis, enterprise risk management, underwriting purposes. But I think for today, what I'd like to do is use it actually as a framework for diving into 3 different use case example.
So the first one, let's dive down into Southern California. So as we move down -- and apologies for anybody on the WebEx, who probably won't be able to see this, but as we move into Southern California, San Diego has had frequent and devastating fires. 2 of note. 2003, the Cedar fire, 2007 Witch Creek fire, both of these caused thousands of -- damaged and destroyed thousands of homes, hundreds of millions of dollars of damage tens of thousands of people evacuated and relocatable. But what CoreLogic has done and what's represented here is developed a 0 to 100 wildfire risk score that's based on the fuel load, so the type of vegetation. One of the primary risk factors is the type of vegetation. Some burns more quickly and at a higher heat than other vegetation. So it's an important factor in the risk. It also factors in slope and aspect, so the direction of a hill and where a parcel is relative to that, as well as proximity to a wildland, urban interface. So as new housing developments come up, they're oftentimes closer to a wildland area that's more prone to burning.
So this model then, identifies precise risk at the property level. It's used by the majority of our top 10 insurers and it helps these insurers assess the portfolios, make appropriate underwriting decisions and reduce the need for inspections with better information. Based on our studies, 82% of all wildfire properties -- wildfire lost properties scored between an 80 and 100 in the wildfire risk score in our model, while conversely no homes scoring 50 or less was lost in a burn.
So now let's zoom back out of San Diego and take another example. In this case, we're going to come out of San Diego, look at the U.S. again and we're going to dive down into the middle of the country and look at Oklahoma. So as we zoom in here in Oklahoma, the example I want to give you is how an oil and gas company might consume our data.
So what you're seeing here is an oil and gas company's pipeline that's running through a populated area. So an oil and gas company, in order to stay compliant with regulations, they often have to send notification to any residents with a certain distance of an oil pipeline. They need to mail them that information.
So frequently, we will partner with an oil and gas company to overlay their pipeline with our parcels in our core property data, which has things like owner information, mailing address. So they'll buy from us and we'll partner with them to provide all of the parcel data, the owner information to manage that milling process and also use this information for, for example, future pipeline routing, to manage site locations decisions and as I mentioned before, to ensure tax compliance with different municipalities because we have a municipality tax layer and they owe taxes to those municipality that their pipeline runs through.
So third use case example. Finally, let's zoom back out of Oklahoma. We'll take a look at the U.S. again and now let's dive down and let me elaborate a little bit more on the example that George talked about, which is near and dear to probably many people in this room, which is how we work with several of our customers and leading up to last year's Superstorm Sandy.
The implications to our insurance customers, I think, are pretty obvious and similar to how they would use data like this from a storm surge and flood standpoint like they use wildfire in California. What I want to talk about in this example is, as George mentioned, working with our lender and servicer clients in preparing for and managing their processes during this catastrophe. So the most devastating effects of this storm were not wind related. Oftentimes people think of hurricane-force winds, but it's really the storm surge. And CoreLogic is a leader in modeling the risk of flood and storm surge.
Our analysis reveals that almost 50% of properties that are identified -- that we identify as at risk are actually not inside of a FEMA 100-year flood zone. So using our flood risk score and storm surge model, 72 hours before the storm made landfall, we were running our customer portfolios through our models and delivering our storm surge score, our flood risk score, our distance to coast, distance to flood zone and other analytics. And there are many different ways in which our customers were using this information. Some of them were managing originations and knowing -- halting closings in impacted areas, supporting their loss reserve calculations, managing servicing activities and post-event claims support and accelerating some of their post-event evaluations. This information certainly was critical in that-72-hour period and in continuing post event. But increasingly, we're working with our customers to figure out how to proactively use this information and build it into their processes in advance of storms.
So if we can go back to the slides, to begin to wrap this up, from a growth standpoint, these are just 3 of the many use case examples that can be applied for how the Geospatial Solutions business can help these verticals in an expanding set of verticals. The growth potential, I think, has been demonstrated as the unit grew out of our flood business and continues to be an exciting growth area for CoreLogic.
We continue to build new hazard compliance and spatial data sets, while enhancing the granularity of the data. Each of these new data sets that we develop represents a new revenue opportunity and as we get more granular and expand the set of data that we have, it creates incremental modeling opportunities as well.
We have a strong foothold in insurance, but certainly lots of room to grow further insurance. So we see opportunities with insurance and other verticals to expand. But also, as George mentioned, I think there's real opportunity to further penetrate geospatial products into the strong relationships we have in the mortgage and lender vertical and the strong existing relationships that we have there.
Finally, I think we have opportunities to expand our partnerships in the industry, expand our points of distribution and the different data sets that we can put together through partnerships.
So finally, in conclusion, I'm really excited by the capabilities, the team and the differentiated data that we've assembled in this Geospatial Solutions business. More importantly though, I'm excited by I think, the growth opportunities in the verticals I've mentioned and beyond. We're leveraging our core property data, we're building unique data sets in response to customer needs and we're continuing to expand our points of distribution for this business. It will continue to be a key driver in the expansion beyond mortgage for CoreLogic.
So as wildfire season starts to heat up in California and hurricane season just around the corner, certainly we're hopeful for in minimizing the impact to anybody affected by these catastrophes. But as a business, we're also poised to help our customers manage through and prepare for these catastrophes using the solutions that we've built.
So with that, I thank you for your time. I think I'm going to turn it back over to Anand and Frank for maybe a little bit of Q&A before we go to the break.
Anand K. Nallathambi
Rather than for the whole -- all the presentations, we thought that before the break, we can take a few of your questions, if you have any questions. There's a couple of mics in the back.
Brandon Burke Dobell - William Blair & Company L.L.C., Research Division
Brandon Dobell from William Blair. Across the products suite, if you want to call it that, is there a particular strategy to drive more contractual or subscription revenues or to kind of increase the visibility in the business? I know there's a lot of transaction revenues. Can you move that to a different structure with your customers or do you think you got a certain ceiling upon which you keep hitting up against relative to how they want to pay you guys?
Anand K. Nallathambi
No. Actually we think we can increase the recurring revenue base through a lot of the things that we do, a lot of the data points that we have and the data layers that we had. And one of the big attractions for us with the CDS Business Mapping side was they had a pretty good recurring revenue-base, subscription base, the SaaS-based model. That is the plan.
Okay. Within the mortgage space in particular, but also I guess the lending side of it, can use or as you move into the mid-market, can you push more of those kinds of structures? I would imagine the bigger companies are more transaction-focused than kind of subscription focused. Can you push that in the mid-market?
Anand K. Nallathambi
Yes, actually in the lower tiers, it's more of a recurring revenue, subscription-based model. Especially when you talk to mid-market, George calls it almost mass-market. And that's an application where we could turn those kind of models.
George S. Livermore
Yes, Brandon, Barry will talk about it as well but on the services side, particularly on the MOS side, a lot of our client relationships are many, many, many years. You have to be prequalified in order to provide the service. We're seeing increasingly and Arlene will talk about it, the clients just like the quality. So they're not going to put their tax servicing business with somebody that they're not sure can be compliant themselves because the regulations require the vendors to manage their vendors. So all the things are playing at a repetitive nature. It's not exactly a subscription model. The biggest business though, the tax servicing business is what I'll call a pseudo-subscription model because it tends -- the majority of the revenue is life of loan. So once you board that loan, it's in your system and you're monitoring it for the life of the loan, which is typically 5 to 7 years for the deferred revenue stream. So it tends to be very predictable from that perspective. So there are some characteristics to that but I think we're driving towards subscription through the fundamental shift in the revenue mix towards the analytics, which is fundamentally a subscription-based or a long-term contract model. And then typically on the servicing side, you see that in tax, but also, just with the prequalification nature of the ongoing revenue.
Darrin D. Peller - Barclays Capital, Research Division
It's Darrin Peller from Barclays. Just a first question on the advisory services, which has obviously done well over the past couple of years. You had a nice chart showing the revenue there. How do we get comfortable that, that truly is a sustainable business of growth where there's been a lot of drivers that seem to be somewhat timing around regulatory changes or some other one-off projects? Is that something we can really count on going forward? And then just a follow-up I have for you on the analytical side that George talked about.
Anand K. Nallathambi
I believe the advisory services has a lot of room for growth. We have seen a lot of growth and it may be because of this advent of new regulations and evolving regulatory environment. But the emerging regulations seem just as more complex than with the ones we have seen. And Arlene will talk a lot about it, next to the [ph] the letters are fit to be tied with how to really interpret it. There's a lot of clients now that say that if this is the way that they're going to go and QM is the only way to do it, they will not underwrite any other loan but a QM loan. And that's -- you can kind of see that there's a lot still to be covered, and a lot still to be done. So we believe that the advisory services does have potential to grow.
Darrin D. Peller - Barclays Capital, Research Division
Just a quick follow-up. On the data side, I mean, it's -- we've been hearing more and more from some of your competitors that they keep claiming to have data that really comes close to what you have. I mean, you talked about 3,100 counties and we've heard from some of our competitors saying they now have very granular detail data on 3,100 counties. And so one of the differentiating tools you have is not only the data itself, but the solutions you have. Is that -- I guess the question I want to figure out is how much of your data truly is proprietary? Because it looked like in that pie chart you gave, there was a lot of public data that you acquired or really built through the years. Is it truly a barrier to entry or are we seeing competitors catch-up on that front and are you able to keep your edge and really, why? I mean, what's going to lead you to keep your edge in that business going forward?
Anand K. Nallathambi
There is a critical mass that people can easily get to but it's beyond that where you really add sophistication to the data layers. And there isn't any risk, I mean, the return of investment for somebody to just say, we'll go and just get all the data that CoreLogic has. It's more of a time-based thing, too. All the things that George and his team has accumulated over the years in terms of on writers and things like that. People don't usually gather that. So if you're going to go back and do spend money in gathering it, how are you going to justify to yourself that there is return in it? It's a longer-term thing. On the public data records data side, what we start off with was first mover advantage but we really moved way past. And we're pretty comfortable with our lead and it's not something that somebody can easily replicate.
Frank D. Martell
I think a good example is what George mentioned in terms of realtors workflow solution. I mean, every day 70% of the realtors are inputting data into our system, which comes back to improve our accuracy or granularity of our data. That's not something that's going to change. These are 3-year contracts plus. We have a clear market share advantage. So that's just one example of a data set that is going to be pretty hard to replicate, certainly in the next 3 to 5 years. The consortium that Susan mentioned, you don't see -- there's not more than one industry consortium typically. So I just look not at the public record, the contributory data, but across the spectrum of data sets that you get. We're pretty confident we refresh our data to a much more rapid degree. So our databases are updated on more or less a continuous basis versus a batch basis. We spent over $100 million a year on data collection, cleaning and aggregation. It's hard to see the economics for another competitor that may pursue us. But it's a difficult economic scenario to see where that can be a real money spender for anybody.
Darrin D. Peller - Barclays Capital, Research Division
Can I just ask another follow up, just more on the high level? Frank, you went through the cost-cutting and the guidance again. #1, I mean, you've talked in the past about every $100 million of originations equating to about $15 million of EBITDA. Is that still staying true in today's market and your new business -- going forward business model? And then as a follow-up to that, when you think about the cost cuts from the Project 30, maybe just give us a brief roadmap of what's left there? It seems like there's another $20 million that you're working on now for the year, but what's left there? And then what comes from TTI to offset potential drop in originations going forward in a few sentences would be helpful, I think.
Frank D. Martell
Okay, so roughly speaking, on Project 30, this year we'll save approximately $20 million. In addition, we'll spend about $15 million to $20 million of cash cost on the Technology Transformation Initiative, which is similar to what we spent last year. So we have those expenses running through our EBITDA metric. We will spend less than that the following year, so you'll see a benefit of less TTI spending next year. The degree of that will depend on the progress we're making in terms of the transition, which as I mentioned earlier, is quite a complex transition but we expect at this point to spend less money. Next year, Project 30, as we know it today, will disappear. The follow on to that is the TTI which is in 2015. So where the gap here, where the benefit will be less investment spending on TTI and then when you get to 2015, we should reduce our infrastructure spending by $35 million to $40 million a year for the balance of the 7-year deal that we have with Dell services. So that's roughly the expense profile. So we do have a bubble there in terms of spending on TTI to getting savings as we go forward. I think the other thing fundamentally, you talked about a little bit is the mix shift that we're seeing and what that does to our cost structure because if you look at MOS, the more we become MOS and D&A centric, the more leverage we have inherently in our cost model and the more predictable our revenue streams are. I don't want to say that AMPS is not -- it's a diminishing part. And that's where inherently lower margin, so we'll get a margin accretion from that revenue mixshift. But you also get a durability and stability of revenue and a value of that revenue stream a much greater degree than AMPS which is essentially what we do is on the AMPS side, is we have a management layer and a technology layer that manages third-party suppliers that do the work that we do on behalf of our clients.
Lauren Slabaugh - Stephens Inc., Research Division
Lauren Slabaugh with Stephens. My question is on your push into the mid-market. First, who all has that revenue now that you're taking share from and when can we expect to see a real, meaningful revenue stream from the middle market?
Anand K. Nallathambi
On the mid-market, it's already starting. If you look at the competitors over there, it's a fragmented marketplace today. But we also see a lot of consolidations that's about to happen because of flight back to quality. All the lenders have the same kind of pressures out there, whether you're big or small these days. There's a little bit of capital differences but pressures are still the same in terms of complying and providing transparency into your loan quality. So we believe that it's going to start and it plays more towards strength in the future. And I think if we look at what's been happening in the first quarter and what we have at the sales pipeline in the mid-markets, it will happen pretty soon.
Lauren Slabaugh - Stephens Inc., Research Division
Could you talk about who you're taking that revenue from?
Anand K. Nallathambi
From various providers. It's just a flight back to quality. They wanted to go to established providers.
Meredith Zana [ph] with Carwin SM Engine [ph]. When you look at the broader picture of growing D&A to 50% of revenue, what proportion of that growth would come from taking share versus maybe white space of existing customers or brand-new customers in new verticals that are kind of untapped?
Anand K. Nallathambi
As George had it, he had a pretty good slide on what we see in our existing markets. And there's a good amount of growth there. In some of the mid-market areas, we see that happening. It's tough to say exactly what percentage, but it's a mix of existing market, existing products going to lower tier clients and also, new products for new markets that we're developing like something that came out the flood data operations that's really applicable in the insurance industry today and the oil and gas industry. And it's not just that and this gives an answer that kind of combines back to Darrin's question about what data is really proprietary? Outside of the public records data, which we feel like we have an insurmountable lead. But there's a lot of other data that always supports that. And that's the part of their investment that Frank talked about in our technology transmission initiative and the enterprise data management strategy that I talked about, that we want to bring all these data points to the forefront. One particular example is Barry's operation today processes $63 billion in tax payments to 22,000 taxing authorities out there. He tracks about 30 million loans. There's a ton of information that comes from that. The 135 million data digital parcels, can somebody really go and get that? Yes, if somebody has a blueprint of what CoreLogic does and I'm going to replicate it, you can go create that mosaic. Does it really provide you the return and how long is it going to take? The market is shifting already and the changes are complex that staying abreast with the market is going to be really difficult. Therein lies our advantage, to step up and put the pressure on and to focus on revenue growth.
Frank D. Martell
I think the vast majority will be new product and service and penetration. I mean, one of the beauties that Susan talked about and George talked about it, we have a terrific client base that can spend a lot of money in a hurry. And so any of the major originators, servicers or capital markets clients, we've had instances where they may increase their spend $30 million, $40 million a year with CoreLogic. So I think that our penetration or existing client base, going into the middle market is going to drive a lot of that growth. We do think were taking market share in places like data licensing, for example. I think on the analytics side, there's not a really -- there's not another CoreLogic, it's kind of CoreLogic and a bunch of stuff and then we see people like Verisk and other competitors which are great competitors, but just situationally, versus broadly. So in the analytics area, we're really plowing new ground. That's what makes geospatial to me, it's just a fantastic demonstration of taking that flood mapping, but also property characteristics, property values. And in all the other data we have and just modeling it with intellectual properties, so -- but a lot of it will be a whitespace penetration and market expansion.
Anand K. Nallathambi
Okay. Well, let's go for a 10-minute break. Let's take a 10-minute break. We'll come back and we'll get into the businesses again.
Frank D. Martell
Apologies to that. but first up, we're going to have Barry Sando who's the Executive Vice President in charge of mortgage origination services and AMPS. Barry has been with the company or its predecessors for 25-plus years. He knows all of our big clients, has loads of insight and he's really the guy who's driving the scale and share advantages in operational efficiencies in the MOS and AMPS. So Barry Sando.
Barry M. Sando
Thank you, Dan. Good morning -- well, it's not morning anymore, is it? Good afternoon, everyone. I'm going to kick off the second half of this today and I think the clicker works now, right? Let's see. There you go. Anyway, that was my main focus at halftime there to make sure we knew how to work the clicker.
I'm with the Mortgage Origination and the AMPS segments which provides a layer of mission-critical products and services to the mortgage industry. I'm going to give you a brief description or a brief overview of the products and services in my group and then I'll discuss the key focus today as operational excellence.
CoreLogic has always understood that operational excellence means combining quality products with an organization that can scale to meet demand. The tax, fraud and credit organizations can scale to the end and actually scale to meet these demands. Historically, we've worked to create a value by utilizing technology to deliver market leading products that exceed customer expectations. Over the years, these solutions have leveraged advanced in workflow automation, data procurement and spatial analytics that scale quality and service, resulting in a defendable share advantage over our competitors.
Today, these businesses held leading positions in their respective markets. Our share advantage allows us to outperform the market, driving topline revenue while our technology and service advantage allows us to deliver solid margins to the bottom line.
The Mortgage Origination segment consists of really 5 groups. The first is the innovation property tax solution, which basically is our tax reporting and full tax outsourcing. This is the leading market position that Anand and I think everyone has talked about today. Well over thousands of lenders have used this product. Our flood services including -- which includes initial flood zone determination on every property and a life of loan tracking that Frank mentioned. Our credit services, which leverages multiple data sources to provide consumer information and credit reporting. Our national joint ventures where we are partnered with 3 of our largest clients to provide origination settlement services and our mortgage technology, which offers comprehensive origination systems for multiple lending channels.
And then our AMPS group is primarily focused on valuations and outsourcing solutions that assist lenders in dealing with both performing and nonperforming loans. We have earned a strong market position over the years through a consistent client focus, superior service levels, aggressive sales efforts and collaborative relationships.
Our tax and fraud solutions are the clear leaders in their markets and we can count among our clients, some of the biggest names in the mortgage industry.
Now, let's look at unique value drivers and you'll hear this in a second, but the recent changes in the regulatory and economic environments have created a flight to quality need for our clients. To help our customers overcome these challenges, vendors must do a few things, but they have to have a certain level of infrastructure, scale and compliance capabilities. CoreLogic continues to meet these -- meet and exceed these standards, positioning us as the gold standard in the market. We also have long-standing client relationships, some have lasted over 25 years. This is a result of being a strong strategic partner and working closely with our clients to understand their pain points. This knowledge allows us to create deeply embedded solutions from our vast array of products and services in order to meet their needs. In addition, we have a history of streamlining our internal work flows and striving for higher levels of automation. These improvements create faster response times, higher product quality and more efficient order and delivery, all of which, enhance the customer experience and drive high levels of client retention. These benefits -- these improvements benefit CoreLogic as well as our clients. Our transformational efforts have increased our operating leverage, improving productivity and reducing our cost structure, resulting in increasing our operating margins. The chart at the bottom of this slide shows how the efforts have driven margin improvements over the past 5 quarters, which shows operating expense as a percent of revenue.
Now looking at the operating leverage. By providing our clients with superior service levels and solutions critical to the mortgage lending process, we are able to continue to grow share in the core business and markets. In addition of growing our core markets, we remain focused on improving our operating margins. This requires a continuous drive for operational excellence throughout the organization. Producing steady improvement in productivity and quality. At the same time, we are engaged in initiatives that yield complete process redesign and automation. These types of initiatives improve our operating leverage and produce highly scalable businesses capable of easily absorbing large incremental volumes, they also generate strong EBITDA to cash flow conversions.
The tax service organization. I'm going to touch on a few points here, and I think you might heard on it and I've heard Frank and George, but this is our largest business that we have at CoreLogic. And to give you an idea of the scale of this business, today, we're currently serving over 30 million loans with a portfolio of tracking over 38 million property lanes. We have a relationship with over 22,000 taxing authorities, and have established high levels of automation with the largest agencies. In 2012, again, just to show you the scale, we processed or paid approximately $63 billion in tax payments. We are the market leader. We also have 22 of the top 25 servicers in our camp.
Some of the story in the flood organization. The flood organization is highly automated. We have the most comprehensive digital parcel database in the U.S. which contains data that you've heard from Jay on 135 million parcels, 93% coverage. These digital parcels are tied to a tax ID, an address and also a latitude and longitude. It's very important that we identify exactly where that property is on the Earth. Our database gives us a unique ability to create multiple internal data sets, returning the best match quickly at a high level of precision. In addition to these data sets that is contributed to the improvements of our product quality, our life-of-loan product is recognized as the market leader and is required by many of our clients. Also, CoreLogic provides industry thought leadership through its participation in the NFDA, the National Flood Zone Determination Association, where we help promote flood legislation that benefits the industry and promotes positive change.
Change. So we enforce what you heard from Jay earlier. This graph illustrates the scope and depth of our parcel data coverage with 135 million digital parcels. The level of coverage drives our automation rates and gives us an unparallel advantage. With a large number of states directly feeding property tax information, this helps drive our automation, speed and accuracy within the reporting cycles for our tax business. And in our flood business, this level of coverage helps us drop spatial accuracy and reduces our risk.
The tax transformation that you heard Frank talk about, it was a great story for us -- excuse me, is a great story. A few years ago, we embarked on a multi-year initiative to transform our tax business, we've recognized that in order to maintain our position. As the market leader, we would need to improve our technology, our flexibility and our productivity. Our focus was on the process optimization, our culture of continuous improvement, asset utilization and systems enhancements. Throughout this initiative, we have generated $30 million in cost savings, above and beyond what Frank was talking about on Project 30.
As reflected in this chart, we have increased the productivity by 73% with the initiatives outlined on the right. Also worth noting, we have improved our quality by 50% over the same time. As market leaders, we embrace these changes, and in fact, have strived to stay ahead of the curve in a way our customers, our employees and our shareholders can all benefit.
And some of our story with our flood transformation, over 14 years ago -- I've been in this for 25 years, I think Dan pointed that out. Over 14 years ago, floods had a tremendous growth in its automated completion rate for flood determinations. By integrating databases and previous flood determinations, spatial technology and the strategic acquisitions, flood has been able to achieve an automated completion rate in excess of 90%, which means, customers receive their orders within seconds after ordering.
Now, I'll add a little bit more color on the flood side. One of the key developments in the flood business has been the use of spatial technologies to automate the business and increase accuracy, and therefore quality. As we approach the practical limits of database-driven completion rates in 1999, we recognize the need to find new methodologies to drive this automation. The several key acquisitions, in particular, the 2003 Transamerica acquisition, we began to develop expertise in spatial technologies and made a strategic decision to invest in this technology. As we grew our internal expertise, we developed the competency to accurately locate a property on the earth. The combination of these capabilities allowed our flood business to increase automation and reduce the number of manual determinations. From the beginning, it was 0 to well in excess of 90% today, a great transformation. As you heard from Jay earlier, embracing and incorporating geospatial technologies into our business, decreased the risk, improved the quality, increased the customer satisfaction that allowed us the opportunity to create new solutions and expand products into new industries.
So in conclusion, to wrap my section up, MOS has the size and the scale, which results in operating leverage. Tax continues to gain market share with its superior performance and operating excellence. Our products are deeply embedded with our clients. We continue to focus on automation, and we are well positioned to capitalize on the changing market in a regulatory dynamics. And with that, I'd like to introduce Arlene Hyde who'll provide more detail on the current regulatory -- here you are -- regulatory trends. That was missing you here. Thank you.
Thank you, Barry. Okay. So good afternoon, welcome. My goal today is to get you through this, because we're going to talk about such exciting stuff as regulatory changes and I want to get you through that before your sugar rush wears off.
So you've heard frequently today about all the regulatory changes that are driving our industry changes. I'm here to help you understand how CoreLogic is capitalizing on these changes. So why is CoreLogic different? What value do we add? And why does performance matter?
The financial services industry is ripe with regulatory -- they stopped. The financial services industry is ripe with regulatory complexity and will be for the foreseeable future. It truly is the alphabet soup of regulations and agencies. This absolutely creates opportunities for CoreLogic. The world has changed for our clients and we are changing with them. Dodd-Frank, DoJ settlement, Consumer Financial Protection Bureau, Office of the Comptroller; Federal Housing Finance Agency; Fannie Mae, Freddie Mac, do you recognize any of these? All of them have updated the way our clients are interacting with their customers and created rules and regulations regarding timelines, documents, customer contacts that must be followed or they can and will assess penalties against our clients. It's an environment rich in rules, guidelines, performance metrics, audits, quality control reviews and vendor management that creates the opportunity for CoreLogic. So how are we capitalizing on these opportunities?
So the changes in the industry allow us to fill a gap, to add an automated solution, to improve our client's decisioning ability, but help them manage the risk. Not only must we proactively respond to client pain points, we must also have a deep knowledge of the industry and the regulations to understand how to craft a better solution. We spend a significant amount of time with a 750-page regulations, and that's just one. Each one of them is between 700 and 850 pages. So we know that we understand the regulations and the impact of those regulations as well as, or sometimes better than our clients. Being a strategic partner and a trusted advisor means bringing a new perspective, view point or a knowledge base to be able to assist in crafting the right solutions. We offer many different solutions to our clients, as this slide shows, including analytics, expert staff on demand, technology and tools.
So why CoreLogic?
We have end-panel data, to not only help our clients, but to immigrate into our solutions to differentiate them from our competitors. So we offer analytics and tools to help clients in various stages of their own. Are they hearing out about default servicing, there are challenges in their mortgage process from origination all the way to portfolio management. You heard a lot of talk about our internal control and compliance environment. It allows us to showcase our strengths better than many our competitors. It also gives our clients the confidence that we can successfully pass a regulatory audit. Vendors are now auditable entities based on the new regulatory requirements. Our financial strength gives our clients the confidence that we're partnering with them for the long run. And our vast product line of other clients to consolidate, products and services with a trusted partner, thereby minimizing their cost and expenses on managing multiple vendors with multiple lines of products. And again, vendor management and the requirements that our clients have to go through are part of the regulatory process today.
So this slide shows you our ability to integrate our data into our own products and services to our clients. This is a visual BPO-check product, which Susan alluded to earlier. So we integrated our data into our valuation operation and improved our efficiency by over 50%. Just using our data to validate the information that was coming in from the BPO lenders. This product allows us and our clients to validate that we have a higher probability of the correct selling price foreign asset. We use our data to confirm the quality of the comparable sales, we use it to confirm neighborhood data and facts. We also confirm property style, ownership lineage and many other items. There's a lot of data and information wrapped up into this kind of a product. But we make it easy for our clients to consume because we wrap this all into an easy-to-understand score and then we represent them with action items, recommendations and red flags. Our clients, you can use this BPO check level. I want you to get it in our BPOs, but they can run in on any vendor in the United States that they get BPOs from. So it's a tool that helps us and helps our clients.
Now this slide is a screen shot of our VendorScape module. Our VendorScape module is used by our clients to manage bankruptcy, foreclosure, claims and loss mitigation processes. It's a module-based unit that allows our clients to ensure they're heeding those regulatory timelines. All right, did you file the NOD on time? Did you notify the borrower? Did you meet the 14-day pre-foreclosure notice? All of that's built into this system. Some interesting -- yeah, I can't talk, statistics. We process almost 1.8 million web transactions on this tool daily, an estimated 5 million default-related processes have been executed within this system. We add an average of 81,000 documents to this system every day. We are integrated with industry standard servicing systems like MSP, and our technology has flexible architectural for quick implementation and integration.
So as we said, all day long, you've heard, "Gee, regulatory changes create opportunities." So here's an example of a product that was created directly from the language in the Department of Justice settlement agreement. So within our massive review of, I think it's 612 pages, of the DOJ settlement. And we picked out opportunities, and this is an opportunity that we've capitalize on. This is our assignment validation report. George Livermore report -- referred to it earlier when he talked about the perfection of the lien that we need to perfect the loan file. So this product provides all the information a client needs to ensure that they are in the correct position to foreclose. Like, do you have all the assignments on file? Can you access an image of all the documents and any intervening assignments, any liens that have been filed? Do you have a perfect lien? Do you have -- are you in the right legal entity to foreclose, right? What George alluded to all the press around the foreclosure crises. It wasn't just one of us signing it. Also, why is the lender in the proper legal entity to take possession of that loan, right? This assignment validation report, gives them all of that information. And not only do we give them the assignment validation report, we also help them correct any discrepancies that may show up because they're in the report. We help them go find assignments, you may file an assignment, so that we help them clarify the property and clarify the ways so they can move the foreclosure forward, if appropriate. So we launched this product in September of 2012. Since that time, we have generated over 550,000 AVRs, which generated over $13 million in revenue. This is a product, again, that can, and it created opportunity from leading the ranks.
But just having a great product today is no longer good enough. You have been able to drive your operational execution to meet your client needs as well. Our ability to combine data with our solutions and bring industry knowledge and keep management experience are all with a metric-driven culture is the right combination, but performance matters more than ever. The regulatory environment, as we talked about, has created additional scrutiny on vendor performance to ensure that correct vendor has been engaged. Objective performance in service-level metrics are now a big, big part of the evaluation process. Poor execution can take you out of any potential engagement, even if you offer the best product or solution.
So how does CoreLogic perform? Here's some examples of CoreLogic performance in a variety of businesses. The loss mitigation scorecard on the top left, difficult to read even in your books, but what you need to know is the color.
On green. On green, that means we are meeting or exceeding the client's expectations in the loss mitigation. Our BPO performance metrics in the top right, it shows us with our term through exceeding the service level agreements of 90% on completed -- completion. CQI, if you're look at your books, reference is critical quality indicator. If it's important to our client, it's important to us. And then our IntelliMods is represented in the bottom side. Our IntelliMods technology decisions all type of modification programs, HAMP, proprietary by DOJ, a consent to order, all of them. It provides the highest quality rates and perhaps processing turn time. We consistently exceed our client's expectations.
So being a trusted partner advisor allows us to provide more solutions to our clients. We recently worked with a large client to help them in their loss mitigation process. They were under the DOJ settlement agreement. They had specific timelines, customer contact, documentation, et cetera, that had to be met. CoreLogic provided over 300 loss mitigation underwriters for this client to ensure that they were successful in meeting those timelines. Our great performance and quality in that engagement is, by the way, still ongoing, had the client requesting specific assistance in their originations process, where they were experiencing processing delays and customers dissatisfaction. We were granted open excess to their facilities. We reviewed their data reports, we talked to their people, we worked through their process flows, and we were able to identify where their challenges were in their process. After 2 weeks, we identified 25 different opportunities to assist this client in their originations project. We engaged in an SIW with them, and in April, we billed over $500,000 in revenue to this client from that engagement. That's a trusted advisor.
As I stated previously, the regulatory environment is critizitional scrutiny on vendors and their relationship. I think our performance is crucial. This Slide shows the actual results of 1 client revenue growth from 2011 to 2012. That's a 57% increase in 1 client. We were able to expand our client -- our product suite with this client to help them manage the regulatory challenges they were facing. Our performance, industry and regulatory knowledge, the understanding of their challenges and our products and tools makes the difference. Being a trusted advisor, not only helps our clients, but it also helps CoreLogic deliver the results.
So in conclusion, this is an industry that is filled with regulatory changes creating opportunities. Industry and regulatory knowledge are critical. Data-enhanced products and services absolutely add value to our clients and to us. And we must continue to be trusted advisors to our clients.
With that, thank you for your time and your attention. And now I'd like to introduce Dr. Mark Fleming, CoreLogic's Chief Economist.
Thank you, Arlene. Thank you. I'm Mark Fleming, Chief Economist at CoreLogic. And I -- my team and I -- I'm not the only one, my team and I, we develop a lot of research, you see a lot of our prep, I'm sure. Well, I have really a very cool job just developing research and insights from all the data in our list and products and services that CoreLogic has that we've been talking about today. And one of the keys to doing that is we put this step out. You see -- we see research publications, we talked to the press, we also want to provide that leadership to the industry and policymakers. So for example, we'll go up on the hill and talk to our congressmen and their staffs, we'll testify -- I mean, congressional hearings, we'll support, in many cases, a lot of the think tanks that are out there doing policy analysis, counsel economic advisers and their congressional research service. So for us, it's about getting the word out. We believe, as a company, that the idea of all the data and analytics that we have and the information and the insight that we can provide is something that is valuable and makes better policy outcomes, right?
The part of the problem is data doesn't necessarily incite make, right? Look at this picture, this is just a collage of snapshots of charts and things that we create in our research reports. The thing is that there's not actually new data here. You don't see a table in a bunch of data points on it, right? What we do is we spend a lot of time analyzing the data, developing the data, taking multiple data assets and putting them together, that's the thing that we've been talking about today. To come up with often times new data sets, house price indices, right? But is that -- at its core, another data set. It's actually a derived data set, in our case, using both our public records and our loan sources. You can also use MLF records as well to mix in there to develop your best insights into prices. The natural disaster step, there's lots of complex pieces of data that go into that. Our fraud score is probably one of the best ideas of aggregating lots and lots of different kinds and pieces of data that come up with, is there potential fraud on a loan? So the trick is to take all those data assets and apply smart people, smart processes, lots of computer technology and programming and develop really something that is insightful as opposed to simply just data. Of course, we have to have a mechanism to disseminate that out. It does me no good if I have some great insight and I have nobody to tell it to. But those of you who have seen me speak before know that, that's usually not a problem of mine. I'm very, very vocal.
So we have a new program, CoreLogic insight, it's on the CoreLogic website, that's our hub where you can come and find many of our research reports. For example, I was thinking your packets today, the MarketPulse newsletter that we released early this week is in there, and our house price index is. You can also find them in historical or archived versions on CoreLogic insights. We put over 40 -- my team alone does over 40 reports a year, and we're not the only ones contributing to that platform. So there's lots and lots of rich information that in reports that we push out to the press. You can see, we do a lot with the press. We disseminate this information through a variety outlets. Most of the major newspapers, television stations, radio networks cover us when we do releases, particularly -- obviously, HPI. We're also very well known for negative equity, which is basically the PL [ph] version of the true LTV that George Livermore was talking about earlier. Not just these folks that I have touched on earlier, a lot of information is also used to support legislative bodies, policymakers and a variety of other people in the business and consumer audiences that need to or want to know and understand more about our market. And I'll touch on, actually in a few minutes, how big our market really is.
So now I'm going to go into -- we're going to have some fun here, because I was going to comment how to access to all this stuff. I'm actually the envy of many of my economist peers, because I have so much data. My problem is not what data to get, it's which one to pick to play with today, right. So let's talk about this idea of insider changing the way we think about doing business. In the older days, we'll call it a legacy underwriting. Legacy underwriting was risk management done, really to understand the concept of the 3 Cs of underwriting. Anyone heard of that term? The 3 Cs of underwriting? Collateral, credit and character, right? Well, I think maybe there was a few years where we didn't really bother with credit and character, we sort of focused on collateral. But we all made maybe 1 small error, and that was we all believed that house prices would always go up, right? And if house prices always go up, then I really don't need to care about. This is collateralized lending, so I don't really need to care about credit or character. The point is we did a process where we'd get lots of different pieces of information, none of those pieces of information would necessarily be tied to each other. So for example, we get income information on our 1003, but we're connecting it to the employment information on the 1003. Kentucky Fried Chicken manager who's earning $300,000 a year. So pieces on the same form, but we don't make that connection, all right? We also look at the credit scores and the evaluation. We talked a lot about valuations and reduced tons of valuations today, right? So the valuation is not really what drives this. It's the valuation today and what is that house going to do into the future that drives risk into the transaction? All these things desperately connected, and many of them nonvalidated, right? In the prior days, we would make our credit lending our lending decisions, we would underwrite those loans based upon this information without really validating what was there. And a classic example is the stated income loans, right? Now we can move to a world where we have more insightful and tied together underwriting risk management. We pull all these pieces together. We want to look at validating all the elements in the 1003. During the fraud scores and integrating the fraud scores with the valuations that Susan talked about, right? We also want to add in a more insightful understanding of what is the real risk that the collateral is bringing. Now what is the price of the property. Although price is an important component, what is the risk that, that property is bringing to the transaction. And as Jay touched on, we understand a lot about national housing. And intrinsically, we even know when there's a lot of flooding, houses are going to get damaged, right? But we don't really understand, going in, what is the likely loss risk associated specifically with natural houses. What is the propensity of default increased by a high rise on our risk score or a higher flood propensity in a particular market. We can integrate all those analytics together.
So let's talk about collateral risk. So simply put, we're going to do a stylized example. For a loan transaction, the price from the appraisal is $150,000. The borrower wants to put 20% down, so he's borrowing a loan of $120,000. Now, the appraiser, the buyer and the lender don't actually notice, but they're on this, because I can make a stylized use [ph] so I'm going to con this, right? So I'm going to make an assumption that the actual value of the house is only $120,000. So effectively, they think they've got a 20% down payment or an equity stake of 20%, but in reality, it's basically a $100,000 LTV loan going in, right. And we're going to make a very onerous decision and say house price values declined by 16%. House prices never decline by that much, right? What was the peaked through -- through number for house prices through the South like nationally? It was 35% So we're already 60% might not be an unreasonable amount of decline, right? The only thing about 16%, because it's a very odd number is it actually makes the math work simply, because that leads to a value of $100,000. Well, I think it's value in itself is up going down isn't a big deal, but what tends to happen is, well, house prices are going down, well, why? Well, there's a recession. So this follower has also gone into default. He's lost his job. So here we are faced with a property and foreclosure that's got declined in market value by $16,000. So the actual value has now become the discovery. We do the BPO, we do the appraisal on the distressed asset, and we become the discovery that it is actually only $100,000. But it's now also a distressed asset, so we're going to apply a 30% REO distressed discount. That what our data says, typically, our resell relative to market value. So they finally fell about REO sale for $70,000. That's a loss of $50,000, right? Part of it is market driven, part of it is because of the over valuation to begin with. So the question we ask is, could we ever avoided the circumstance, right? And the thing about collateral risk scores is they look at the transaction, they look at value as one of the components. So they might say, with that $150,000 price point, that's kind of high for all the other houses in the neighborhood. Oh, and there's a bunch of notices of default and distress that's going on in that neighborhood as well, a micro neighbor, maybe a 2/10 of a mile radius around it, right? And this houses is next to railroad track. So there's some negative externality conditions. And there's some odd chain of title associate with this. So we look at all these broad things that we're gathering out of all of the various data assess to come up with, what is the propensity for that property, independent of the borrower and the credit terms to produce incremental increase and default risk, right? So it's not value base. So their value is one of the components that we look at in the new model, it's at the default flood model score. So you can think of it sort of like as the cycle is the credit propensity payment score for the borrower, collateral risk scores are the propensity payment -- propensity for the borrower to pay his loan based upon just the collateral attributes themselves, right? Now of course, even in the comments -- I mean, show me some data to prove it to me, right? I can't be simply convinced. So let's take a simple idea. Let's take a legacy risk loan, owned or occupied 30-year fixed rate, purchased, not self-employed ADL TV loan. That's actually the bread and butter of today's mortgage market, right? That's pretty much all that really gets done, it's very basic. Now let's take a look at a 700 FICO. So, I put 700 FICO, I call them high credit quality. Although I guess in today's market, that wouldn't really qualify, you need to be 760 or above, but we'll say 700-FICO guy. So it's called teasing [ph] credit quality, and it's got a loan collateral risk score on that property. Now, let's just change one term about that proverbial loan. If we simply take that same borrower, all those same loan terms and have it, find it and associate it with a property that has high collateral risk, they auto default increased by 3x over that low-collateral and 700-FICO-score guy, right? 3x higher propensity of risk, just because the property is more risky. Same borrower, same loan terms, right? This, our data analysis showed this. And then you can flip another one and take the opposite. Let's actually keep the collateral score low and let's drop the FICO score down. So we're going to change just the FICO score to 650, which also turns out to be 3x higher propensity of default risk. So basically, the swing that collateral risk scores can identify similar to that of a 50-point swing on a loan transaction. Take a 700 borrower with a low-risk score, you might perform more like a 750. Take a 700 borrower with a high collateral risk score, he's going to perform more like a guy with a 650 score, right? That's a big -- as you get more insight and information based upon what the property is contributing to the risk on that transaction.
First, look to the second one. We're going to take natural hazards. We talked about spatial solutions information, and a lot of it's here. And so we want to say what does -- what is the risk of natural hazards to the mortgage industry? So first, we have to find the problem. How big is this problem? Did you know that there's almost $18 trillion of residential housing valued assets in the United States today, $18 trillion. Now it's a lot less than it was 5 or 6 years ago, but is it increasing again, right. The -- collectively, the housing industry, whether it's your new home construction, existing home sales, people living in homes and buying consumer goods to furnish their homes, for example, contributes some estimates as much as 15% of total GDP. So a very, very big market, right. Did you know every new home that's built supports 3 jobs, and every 2 existing homes sold supports 1 job? So as we get growth in housing and housing construction, and an increase in the demand and turnover existing home sales, that's going to be very good at creating our increasing job growth in this economy, very important industry. And then we focus on what is the leverage all of those housing assets, the mortgage debt outstanding, MDO, we'll refer to it. Well, we're going to analyze our negative, that would be 48 million properties in the United States that are mortgaged residential homes. And we do a little bit of cleaning, so it's somewhere just around -- just under 50 million properties with mortgages, right? That's $9.4 trillion of loan balances extended out to them. Not even accounting for all the derivatives of finances that would multiply that effect out, $9.4 trillion outstanding growing at an annual rate of about 5% over the last 2 decades or so.
Now, let's take a look at the natural hazards side. How big are natural hazards? Well, there are $112 billion of losses according to one industry estimate. Last year in 2012, in total losses, $62 billion of that insured in the United States. But I find it really interesting they showed us also international numbers. Here and large across practically all, something like 70% to 80% of the losses due to natural disasters actually were in the United States. Of course, that's in part, because the value of the assets in the United States are much higher than in many places. Homes in Bangladesh don't cost as much as homes in the United States, right? Hurricane Sandy alone, $50 billion of impact by 1 estimate. I think it's been upgraded to more than that now. Economically, $10 billion to $20 billion in short, in part, of course, because of the fact that it happened here in the New York metro area, and I'll show you in terms of some of the statistics what this is because, it's a high-priced market. So I did a little model here. I want to start with our nationwide population of mortgaged households, that $48 million property sample. And when I go through them, we basically have a process where clean through all the public records and we collect up all the outstanding leans.
I'm going to figure out what the total amount of mortgage debt outstanding is on each one of those $48 million properties. Firstly, at Xerox, home equity loans collectively add them all. So that is sort of the total household debt, right? Or household mortgage debt outstanding. And I'm also going to run an AVM and get a valuation on that property, so I can come up on with effectively a true LTV for these 48 million properties, a current sale within the property. And then we start at the mortgage debt outstanding is that some of the component that's what's potentially exposed to us. Because you're mortgage lender, it's not what the value of the is, it's how much money did I lend against the house, right? Because that's why put out there, that's what I need to try and recover, right, is the MDO. Where to find exposure is basically borrower scale by the probability of a risk event. So for every dollar of mortgage debt outstanding, if the wildfire risk is 100%, I'm going to give it a count of $1. If the wildfire -- well, if it's something like wildfire, we need is hurricane winds, but if the risk is 50%, you will basically scale that $1 and account it for $0.50 of risk. Because this risk is 0, then that dollar is not exposed at all, right? And we certain conditions like that as well. And we do -- when we're going to aggregate it all out. So we're going to say after the total exposure, obviously, is simply the sum of all of those exposures. I'm going to do it on 2 natural hazards when -- hurricane wind risk and tornado risk. But before I get it really quickly, let's look at all that mortgage debt is. It's not uniformly distributed across the United States. You can see we have big pockets in all the major metropolitan areas, certainly a lot of mortgage debt outstanding is the mid-Atlantic and Northeast. You've got markets like Washington and New York and Boston, big concentrations down in Florida, Atlanta and then, of course, on the far -- on the West Coast in California, Seattle, and New York -- Seattle and Oregon and some other pockets like Chicago and those places.
10 markets. The top 10 markets for mortgage debt account for 35% of the total, and they're all sort of situated on the coasts, right? But there's also the problem of, if a natural disaster were to hit, if I had equity on my house, I might have a very -- behavioral differences on that sort of choice of what I might do. If underwater, we all know what the term under is, and under in my house going into a natural disaster, the idea of me walking away is much more likely to happen, right? So let's take a look at where all that negative equity is. In fact, the whole LTV distribution of those 48 million properties. Red basically indicate higher shares of negative equity, all right? So no surprise. Lots and lots of red out West: Arizona, Nevada, Southern California. So even pockets up in Northern California. And not surprisingly as well, Florida, has a high degree of sort of shift in that LTV distribution to the high end of negative equity shares. And above of that spike there is Atlanta, just north of Florida. Not so much in the Midwest or up in Chicago. And certainly not so much here in the Northeast either, not really in equity position. So how do we want to think about this is we're well about risk hazards and where all the natural hybrid risks come in to play and combine with this sort of this LTV distribution is where we're really going to generate defaults and potential losses, right?
So now, can we move to the video, please? So before I actually start playing with it, Jay had a video site that I had to have one too, all right. So we took 48 million properties and we said -- can you pause it. Oh, yes. So we took the 48 million properties and we said, first of all, we're going to take a look at hurricane list. So what we're going to walk through right now, is where the mortgage debt exposure, so I'm taking the amount of dollars scaled by the probability of the hurricane winds occurring. But basically looking at a 3D extruding map to show you the flyover where that exposure risk resides, as a combination of where the dials are where the natural hazard risk is. And I have some steps -- I mean, to make sure I'd get them here.
Okay, hit play. So we start in the Gulf Coast, and you could see Houston, a high spike, that's $1.7 billion of exposure on $12 billion of mortgage debt outstanding. Say in coastal market, obviously a lot of risk there to hurricane winds. So we move along the coast. You see New Orleans, it's actually relatively spread out with $2 billion of exposure. Maryville, much more on the coast, another $1.3 billion. And now we go to Florida, and that's where the fun really begins. In Florida, Tampa, $15 billion of exposure to hurricane winds. $12 billion in Orlando and the big deal, the Miami. As we zoom around here in Miami, $219 billion of mortgage debt in that market, of which $61 billion is exposed heavily on the coast. If you move over the coast, you some smaller markets. Something that really surprised me is actually Washington. While it's a big market, $356 billion of MDO, $8.8 billion in exposure. And then it really begins to fade off. New York, while we did have Hurricane Sandy here, is not necessarily considered a high risk for hurricane wind market. I guess it was a tropical storm by the time I got here, so winds weren't really the problem. As you can see, and it finally ended in Boston, $14 billion of MDO and $826 million in exposure. So as you move up the East Coast, that risk fades away.
Let's move to the next one. So this one is going to be tornado winds. Same idea, relative exposure of the probability to the mortgage debt outstanding. You can see as we tilt-in on the map, as we tilt-in on the map, tornado winds tend to be much higher, they're much more spread out as many more markets that are exposed. Here, I think, the point -- the real one is Dallas, it's $63 billion. And we move across the coast, you still see New Orleans and Maryville, $4 billion and $1.7 billion respectively. And then unfortunately, here comes Florida again. Even in Florida, tornado exposure, $62 billion in Miami, again, right on the coast, but some of the other markets also up there. That's only slightly more actually than hurricane winds exposure risk in Miami. As you move up the East Coast, coasts in that market have tornado risks like Charleston and Charlotte back there in the back. Again, Washington, a place you would not think of us having tornado risks, $64 billion in tornado exposure. And even, that begins to drop off quickly. But then you have to move inland from the coast. So Chicago, no surprise, it's called the windy city, maybe there's a reason for that, $92 billion of tornado exposure, and then we got the Midwest. And even Denver, the significant exposure is the $33 billion. The only safe place with regard to tornado wind is west of the Rockies. De minimis risk, as you can see on that final slide. A de minimis risk west of the Rockies. Yeah, Mark will finish it. Let's sum that all up with -- sum that all up by looking at our overall statement. We're going to now combine those 2 risks together. So let's say, if you have a $1 of exposure risk to hurricane and a $1 of exposure risk to tornadoes, well, the combined is $2 or something there obviously. So you can see Florida, the highest market there was $307 billion of total exposure to the 2, not to mention storm surge, sinkhole, wildfire. Is the weather really worth it Florida?
In total, the next 2 markets. New York is big, not because of the risk but because of the large amount of mortgage debt outstanding. Texas certainly has the high wind tornado risk relative to -- relatively smaller, but still not -- inconsequential sort of MDO. In total, we measure it as $1.4 trillion of total exposure. Well, that's 18.5% of that total MDO outstanding, it's significant. Now it's true that you wouldn't necessarily, just because it's exposed it doesn't mean you're actually going to loose every one of those dollars. And the next step in the equation that someone would do, would actually be to apply lost estimates to come up with what their measure is for. So -- and this is a really good and interesting way to think about more broadly how we can view risk and change the way work and operate in a new dynamic, more insightful house, very big housing market today, all powered by the things that we can do with our data analytics and products and services here at CoreLogic.
And with that, I'll turn it back to Frank and Anand for questions.
Frank D. Martell
Before we start, Bob, I just wanted to -- because I didn't address the one question about the sensitivity and I want to make sure that we constrict that and in a wrong way. So it is a fact that every hundred billion, this is consistent with what we told, the market percent for your time. Our exposure to this regime [ph] in primarily centered in our mortgage origination segment. Roughly every hundred billion of revenue -- our mortgage origination activity, plus or minus, is about $20 million to $25 million of revenue impact and $12 million to $15 million of EBITDA impact. As we evolve for all of the automation, the impact on the bottom line is being more muted as we go forward, but those numbers still hold true from a historical and current perspective. So I just want to make sure that nobody's -- I got that one. Any questions? We'll take a few questions, go ahead. [indiscernible].
Going to the tax business for a second. How do you guys grow that business long term? And is there a ceiling it or at some point, where you just kind of tap out, either based on market share or just number of records or something where -- it that 1 year out, 2 years out, 5 years out?
Anand K. Nallathambi
I'll address that, the question, in 2 different ways. One, is we still see there is some ability for us to improve margins there to automation. And Barry and the team has been working hard at that. So that there is room to grow at the bottom line. The top line, that market used to be -- the market makers used to have it in-sourced market. And that market is opening up because of regulatory changes and a lot of other pressures that the lenders have. They're now trying to look at established providers. And if you really look at the -- actually, the market leader, we have better than a fair chance of getting those kind of accounts.
Frank D. Martell
Anybody else? Darrin.
Darrin D. Peller - Barclays Capital, Research Division
Just a follow-up on the conversation on the tax business before. It's a business that obviously stands out in terms of market share leadership. And I think it's been a very good driver for your origination business for a long time. Just, can you give us a little color? You have about, I think, you said $30 million loans that you actually paid tax for out of roughly $50 million in the country. What is the ability, first of all, to move that business beyond the U.S. borders? I think that was a concept of opportunity years ago that you talked about. And then, what is the rest of the market made up of? Is it all in-house or?
Anand K. Nallathambi
There are a few providers that -- the rest of the market, the big piece of it is the in-source market, which is now, we see that opening up. In terms of expansion opportunities, internationally, one of the things that we said was there's a lot of comments out there who are looking at consolidating tax revenue and looking at revenues to come in. And the capability that we have here and the ability to dealing with taxing authorities and bringing that on the behalf of the lenders and moving it on, is a capability that we could port to different economies out there. Obviously, we are working with the Mexican government on that. But one of the things that we've been doing over the last 36 months is to focus on our internal immediate markets. So in the future, we look at it, but it's not like an immediate area of focus for us at this point, unless it's an incoming opportunity that we have because of our size and skill that somebody calls us in.
Darrin D. Peller - Barclays Capital, Research Division
Okay. And then just moving over to the AMPS, the default -- the default business. It's obviously, come up quite a bit that you've really start to focus on that business then you scaled back from being in that business menu really kind of going full-steam ahead of that business again and seen decent traction there as a result of your focus. So is it safe to say that is a business that CoreLogic will be in for the next couple of years now? It's not somewhere because of its low margin profile that you look to marginalize more?
Anand K. Nallathambi
The important piece of that, Darrin, was we didn't like the profitability metrics on that business, the way it was structured. What we try to do over the last couple of years is really focus on where we are, the outsourced services partner, and we talked now with our customers in the -- along the key pain points and we try to do what our services that they -- it doesn't really fit them and where we can do it. The first starting point being if it that official for us from a margin perspective and that it fits the profile, then we will be in that business. There are some pieces of the business that we don't like the margin profile, and we don't know if we could -- it will stand long term. But the growing piece of that business staff hours and patient pays. And I also think that quality control underwriting piece, there are pieces that really fit what we want to do. And it really supplements and complements what, Darrin, the mortgage originations services desk.
Darrin D. Peller - Barclays Capital, Research Division
So on a steady run-rate basis, once refis come down, originations are more normalized level of revenue. I mean, is that a business that will still be 15%? Or is that a lower, smaller...
Frank D. Martell
You'll see it decline from where it is today, the percentage of revenue.
Darrin D. Peller - Barclays Capital, Research Division
Okay. Just last question and I'll turn it back over. On the free cash flow conversion, it's been a very high number. I mean, from a free cash flow versus EBITDA standpoint, you said that 50%-plus, we're seeing 58%, 60%, 55%. Is there anything you need to the last year or 2 or something that's been driving that much higher that shouldn't be sustainable?
Anand K. Nallathambi
Yes, so basically, as we become more profitable, we've become progressively a higher cash taxpayer. A lot of restructuring that we did, we have some tax yields based on the -- some of the closures, some of the business that we had in 2011. LeadClick and some of those other business that we exited. That's all working its way through the system. So as we go forward, the test on numbers that we've been generating, which has been the mid-50s percentage, slightly bigger, depending on the timing. Because we had some seasonal timing issues like we paid the bonuses for the prior year in the first quarter, estimate tax payments kick in the second quarter. So we're a little of a pattern there. But, by and large, the 50% to 60% that we see is where we should end up in the longer term. We said at least 50%. First quarter was good, but we didn't have any estimated tax payments as an example. And so depending on that can move up that number a little bit from a percentage standpoint. And we reevaluate the target as we go forward. Obviously, we're trying to push up the target as we go forward, but I think it's -- as we still spend money TTI, when we spend it, that could affect. So I think the 50% or greater still -- is still good for us.
Frank D. Martell
By the way, just to amplify what Anand said. On of the default side, we have done a lot of work in default on reengineering the revenue mix, and exiting on profitable loans, we don't talk a lot about it. But for example, you got a claims processing business, that we wound down in the first quarter this year, that used to generate roughly $10 million of revenue per year, but what not a profitable of, what investment. So we've been growing the loss mitigation part of the business, and getting out of some of these lower margin processing areas for us. But it is a business that's fundamentally people-driven and it's below our margin targets longer term as a company, and that's why the growth of the other 2 segments will push that mix down. Mike [ph]?
So looking at some of the cool video and slides that we saw here, and taking back a decade when people don't really understand why Google needed to acquire satellite information. Is there an opportunity here to consumerize this information in some way? Or would you be alienating your institutional clients in doing so, because that will become more commonplace and then be reduced in value?
Anand K. Nallathambi
It's a -- I don't think it's a question of alienating our customer base. It's a question of focus, and it's a question of priorities and where we see near-term growth and then long-term growth. The access is very similar to how we look at international. There's a lot of things, even on geospatial that we could do in the Far East -- in Far East Asia that, I meant. We're just taking it one step at a time to say let's just maximize our immediate potential here. And then there may be some market that open up. And the consumers in the market that we should look at, at some point, it's a pretty expensive market from a capital-intensive format in terms of spending marketing dollars. So we are very careful, we want to stick to our knitting and stay focused. And one of the biggest things that Frank and I always talk about is we're on a run, and this has been 7 beautiful quarters. We don't want to give that up. So anything we do in terms of buying a company or investing for growth, we want to make sure that we see the returns there is accretive, Okay.
Frank D. Martell
Well, if there's no other questions I can --
Anand K. Nallathambi
Okay, well, it's been a long day, about 3 hours. But I hope that you really enjoyed the deep-end dive into our operations. In closing, I would say that when we started the journey, about 3 years ago, we've done a lot in the last 3 years. And it's been busy, busy time for us. Well, first, we restructured our portfolio mix. We started out in 2010 with about $2 billion in revenues. We thought that goes about $600 million of revenue that really were in core. While it didn't set the margin profile as the risk profile that we wanted, we exited those businesses, then we wanted to really focus on the bottom half of the P&L. And we knew that, because of our roll-up on acquisitive tasks, we needed to decentralize and consolidate a lot for our structures. So we outsourced services that didn't really -- or it wasn't our core competency. We did that by selling our capital to Cognizant. We brought on procuring for strategic sourcing. The longer-term project with technology transformation was Dell, it's the right thing for us to do. So we have been doing those kind of things. And internally, too, we have been consolidating and centralizing a lot of those things and on to our corporate shares services network. All of those things are the reasons -- are the first that you're seeing over the next -- that over the last 7 quarters. And now, going forward, what we're trying to do is in the top 4 part of the P&L, where we're really focusing on top line growth, and we want to make sure that we're ahead of the curve where the margins -- markets may come down over in the next couple of years, we want to be ready. Which is why we aligned our organization with the go-to-market function that George leads this now. And we're pretty excited about where we're going, and it's a lot more focused on client engagement. You heard from Susan and Arlene, we're bringing in practitioners not only from our customer base, but also from other industries, so we could really have a pretty robust group of executives really looking at our data sets and seeing how we can take it to the next level. So it's an exciting team -- time for our company. I think we're well positioned for growth in 2013. And regardless of the mortgage market, we are confident that we're going to be a country that will create shareholder value. So with that, thank you very much.
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