Trade Media - Use of Alternative Credit Data in Mortgage Risk Assessment can help Increase Lending Opportunities
October 30, 2012, Irvine, Calif. –
—Analysis Quantifies Value of Augmenting Decisions with Newly Available CoreScore™ Supplemental Credit Data and Scoring Models—
CoreLogic® (NYSE: CLGX), a leading provider of information, analytics and business services, today announced the results of a report published by CEB TowerGroup analysts that found there are benefits for lenders who use supplemental credit data during the mortgage credit risk assessment process. The white paper, titled “Enhanced Credit Data and Scoring: Deeper Insight into Mortgage Applicants,” examines the current state of credit scoring technology, the strengths and weaknesses of current credit data and credit reports, and describes how timely new consumer and property data and risk analytics can improve loan underwriting and credit granting decisions. CEB TowerGroup confirms that using new credit data and scoring analytics can help mortgage lenders refine their origination risk management techniques, reduce underwriting costs, and grow their lending portfolios safely and profitably.
“In an effort to fund more loans while mitigating potential losses, lenders have increasingly shown an interest in new data sources beyond the traditional national credit reporting agencies to help better predict consumer credit risk across a broader range of credit profiles,” said the CEB TowerGroup’s senior research director, Craig Focardi. “Multiple data providers have responded to this demand and provided options for lenders. The challenge facing lenders today is determining what supplemental credit data is relevant and predictive of future consumer behavior, and once identified, deciding how this data can be incorporated into their existing processes. This white paper provides actionable guidance on both of these questions.”
CEB TowerGroup evaluated results from a joint analysis conducted by CoreLogic and FICO that compares the predictive power of the FICO® Score used by most lenders today with the FICO® Mortgage Score Powered by CoreLogic®, a new score launched in July. The FICO Mortgage Score Powered by CoreLogic adds critical risk insights from the traditional and newly available supplemental credit data contained in the CoreScore credit report to enhance the view of borrower credit behavior. The results of the joint study showed that both the traditional FICO Score and the new score rank order mortgage credit risk well, with the majority of loans that eventually default falling within the riskiest loans identified by the credit scores. However, the new FICO Mortgage Score available with the CoreScore Solution identified 10 percent more bad loans earlier in the riskiest 10 percent of the lending population.
“Extending credit to more consumers is top of mind for lenders and consumers. Lenders want quantitative evidence of how supplemental credit data can improve their lending decisions. The CoreScore Solution addresses this need,” said Tim Grace, senior vice president of Product Management at CoreLogic. “This white paper from a well-respected third party provides an assessment of the value of the supplemental credit data from the new CoreScore credit report and new scoring analytics contained in the FICO Mortgage Score Powered by CoreLogic. It shows that lenders can improve their identification of credit risk by double digits, allowing them both to approve good loan applications that might otherwise be declined and further verify or decline risky applications that might otherwise be approved. For a top-20 lender processing 300,000 applications a year, adopting this new score could translate into 3,900 more loans approved every year along with a net financial benefit of $14.5 million.”
The white paper, “Enhanced Credit Data and Scoring: Deeper Insight into Mortgage Applicants,” can be downloaded online from CoreLogic. Lenders wanting more information about the CoreScore credit report and FICO Mortgage Score Powered by CoreLogic can learn more at www.wheneverythingchanged.com.
CoreLogic commissioned CEB TowerGroup to conduct research and analysis of consumer credit data, reporting and scoring practices, and trends in financial services. The content of this report is the product of CEB TowerGroup.
CoreLogic (NYSE: CLGX) is a leading residential property information, analytics and services provider in the United States and Australia. Our combined data from public, contributory and proprietary sources spans over 700 million records across 40 years including detailed property records, consumer credit, tenancy, hazard risk and location information. The markets CoreLogic serves include real estate and mortgage finance, insurance, capital markets, transportation and government. We deliver value to our clients through unique data, analytics, workflow technology, advisory and managed services. Our clients rely on us to help identify and manage growth opportunities, improve performance and mitigate risk. Headquartered in Irvine, Calif., CoreLogic operates in seven countries.
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