By Mike Colpitts
A new product designed to increase mortgage lending and aid bankers in their risk taking decisions is being launched by real estate research firm CoreLogic in conjunction with FICO. The credit scoring product evaluates traditional credit data from consumer credit files and adds a new series of dimensions to more accurately reflect credit risk for home mortgage borrowers.
The product incorporates a new scoring range, and adds prior FICO credit reports, making it easier for lenders to integrate and for consumers to understand.
“The new FICO Mortgage Score is designed especially for prequalification and origination and delivers increased insight when it matters most,” said Joanne Gaskin, senior director of the new product management team at FICO. “For many lenders, the increased predictive lift will translate into thousands of new mortgages, and the avoidance of millions of dollars in bad loans and associated costs. This innovation is a win-win for lenders and consumers alike.”
The product was designed to predict consumer mortgage loan performance, and has demonstrated substantial improvement in risk prediction over other risk scoring criteria in use by banks today, according to CoreLogic. The new model was developed by FICO to leverage data from CoreLogic resources to help lenders make better decisions in their mortgage lending process.
“In this complicated operating environment, lenders are increasingly turning to new data sources to help better interpret a consumer’s credit risk, so that more loans can be approved while mitigating potential losses,” said Tim Grace, senior vice president of product management at CoreLogic.
“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,” said Grace. “As such, it not only provides a more complete and predictive evaluation of a consumer’s credit risk profile, but it can empower lenders to better mitigate risk and approve more loans for more consumers.”
The product is an industry first, incorporating a multi-credit bureau credit score generated from traditional credit bureau data combing additional with CoreLogic data. Supplemental data includes additional applicant credit history, property history transaction information, landlord-tenant data and public records information not typically found in credit reports.