New Mortgage Credit Risk Analysis In Development

By Mike Colpitts

Two of the nation’s largest financial firms have teamed up to produce a new credit risk analysis Scorescoring product to determine whether mortgage applicants qualify for home loans. A division of CoreLogic, Credco and FICO – the leading provider of analytics and decision management technology for the financial industry signed an agreement to develop the new product.

The combined efforts represent an unprecedented step in the financial services industry in the wake of the real estate collapse and the foreclosure of millions of U.S. homes as a result of flawed credit risk analysis. The new credit risk model will provide mortgage lenders with greater visibility into borrowers’ future likely financial behavior.

“Lenders today need as much actionable consumer information as possible so they can safely grow origination volumes and avoid future losses,” said Greg Pelling, who is the vice president of FICO’s scoring and analytics division.

FICO developed the credit scoring system presently used by the lending industry to determine the likelihood of qualifying applicants for mortgages and other loans, including loans on cars and small businesses.

“CoreLogic’s unique data allows us to lever FICO’s deep analytic expertise and industry standard mortgage score to create the consumer credit risk insights lenders need in today’s volatile market and for the future.”

credit report

The new credit scoring product will combine unique data contained in the Core Score Credit Report with the industry-standard FICO mortgage score. Future products will leverage application data to deliver additional insight so lenders make fewer mistakes in their lending processes.

The banking industry has revamped mortgage products sold to home loan applicants since the financial crisis exploded on Wall Street more than three years ago. Few subprime or ALT-A mortgages which caused much of the initial problems in the real estate crash are being sold, and have been replaced by more conservative fixed rate mortgages made to consumers.

“By blending the unique data from CoreLogic with the analytic expertise of FICO, we will be able to deliver a new and more predictive credit score with our recently launched CoreScore Credit Report,” said Tim Grace, head of product management and analytics at CoreLogic. “Together, this new credit report and credit score will provide the mortgage industry with increased visibility into consumer credit behavior and improved credit risk analysis. We envision this score as the first in a series of new scoring solutions that FICO and CoreLogic will create for use in the mortgage industry and beyond.”