Mortgage lenders are looking for potential mortgage borrowers outside the current requirements for pristine credit consumers. However, lenders have not been able to identify strategies for targeting prospects with lower credit scores than the ever-shrinking pool of typical prime and super-prime borrowers.

Credit analytics provider Experian notes in a recent white paper these lenders will not be able to meet portfolio-growth objectives without widening the potential market base.

“Identifying near-prime borrowers is a trend in place for the last 8 years, but lately there is a renewed focus as small-to-medium-sized lenders get into the mortgage space more,” said Michele Pearson, vice president of product management at Experian. “We want to give those folks a chance to identify those borrowers.”

Pearson estimates there are 17.3 million prospects for originating new mortgages being overlooked by lenders. It’s not by choice, but rather due to the fact many of these otherwise reliable consumers hold little credit history.

Pearson said the latest VantageScore credit modeling could better assess the creditworthiness of 10.5 million of these excluded consumers.

The white paper runs a scenario in which 52% of a given “near prime” population of 865,111 people are measured for mortgage creditworthiness.  After dropping out those likely to be bad borrowers, the potential for new mortgages equaled $3.86 billion in missed business.

jgaffney@housingwire.com

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