Equifax is giving lenders another way to evaluate borrower behavior and identify the likelihood of mortgage default. It’s a new metric called “default distance” and it measures the time lapse, in months, between when a borrower defaults on revolving debt, such as credit card or auto payments, and when a borrower first starts the foreclosure process. A positive number indicates a borrower defaulted on a revolving debt first while a negative number indicates a borrower defaulted of their mortgage first. Equifax puts their method to the test in a recent study, which found that revolving debt defaults consistently occur before first mortgage loan defaults with the timespan between them decreasing over time. “The most substantial decrease in default distance can be seen among loans with high current combined loan-to-values — a trend driven in part by rising strategic defaults,” Equifax said. Equifax linked anonymous borrower credit information to CoreLogic loan-level, mortgage-backed securities data to measure default distance at every point in the life of all nonagency securitized loans. Analysis was performed utilizing Federal Housing Finance Agency home price data on mortgage loans for borrowers with only one mortgage outstanding and revolving debt included credit card and home equity lines of credit. According to the study, default distances shrunk in the states hardest hit the economic recession and housing market collapse. Florida, California and Michigan had the shortest default distances, all less than five months, while Texas and South Dakota had the longest, about 15 months.

(red = 4-6 months; blue = 7-9 months; green = 10-12 months; purple = 13-15 months)

The study also found that high credit scores are not necessarily correlated with long default distances, meaning someone with respectable credit may default on their mortgage soon after they default on their revolving debt. “In general, borrowers in these score bands consistently pay all their credit obligations on time,” Equifax said. “However, when these borrowers default on one account, many of them end up defaulting on multiple other accounts at the same time.” Overall, the average default distance has decreased since 2005 entailing that less time elapses between revolving debt default and mortgage default. Afshin Goodarzi of Equifax Capital Markets is scheduled to talk about securitization data and analytics during Wednesday’s American Securitization Forum’s annual conference under way  in Orlando. The company also is showcasing its data in the exhibit hall. Write to Christine Ricciardi. Follow her on Twitter @HWnewbieCR.