CoreLogic (CLGX) and predictive analytics firm Fair Isaac Corp. (FICO) launched a consumer credit risk score that they said will improve lending decisions and boost the amount of mortgages lenders originate.
Called the FICO Mortgage Score Powered by CoreLogic, the enhanced system evaluates both traditional data and CoreLogic supplement data. It expands the applicant credit spectrum by including property transaction data, landlord/tenant data, borrower-specific public data and other alternative credit data.
Tim Grace, CoreLogic senior vice president of product management, said for a top 20 lender who processes 300,000 applications a year, adopting the new scoring model could translate into 3,900 more loans approved every year for a net financial benefit of $14.5 million.
“(The model) 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,” Grace said.
In supporting the need for the new system, the two firms cite an April survey of bank risk professionals. Conducted for FICO by the Professional Risk Managers’ International Association, the survey indicated that bankers continue to lack confidence in the housing finance marketplace.
Of the bankers surveyed, about 75% expected the level of mortgage delinquencies to increase or stay the same over the six-month period following the survey. More than 85% hold the same view for home equity line delinquencies.
“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,” said Joanne Gaskin, mortgage practice leader at FICO.