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Integration Expands Credit Report Options

ReverseVision, a provider of software and technology for the reverse mortgage industry, has completed its integration with Informative Research, one of the nation’s oldest and largest credit reporting agencies. The integration makes it faster and easier for users of RV Exchange (RVX) loan origination software (LOS) to order Premier Credit Report, Informative Research’s version of the tri-merge credit report that has become the mortgage industry standard. Credit information supplied by Informative Research is available in RVX as of the system’s June 16 update.

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“With this integration, Informative Research and ReverseVision assure their mutual customers unmatched access to critical credit data needed for originating reverse mortgages. Further, the integration helps support our unceasing commitment to improving lender workflow and streamlining credit reporting capabilities,” said Informative Research Chief Operating Officer Stan Baldwin.

Founded in 1946, Garden Grove, California-based Informative Research is dedicated to providing the industry’s most accurate and complete residential mortgage credit reports and is renowned for its innovative technology. For decades, Fannie Mae and top lenders have trusted Informative Research and its proprietary Keystone logic system, which allows individual reports from the three credit bureaus to be merged into an easily understood, accessible format with duplicated or incomplete listings removed for lender efficiency.

“Through this integration with Informative Research, RVX users will experience ease-of-access to the critical credit information required to identify qualified borrowers,” said ReverseVision Vice President of Sales and Marketing Wendy Peel.

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RVX is San Diego, California-based ReverseVision’s flagship product. The LOS serves as a centralized exchange, connecting all participants in the lifecycle of a reverse mortgage by allowing them to log in to a single system to share documents and information for each part of the loan process.

Informative Research enables lenders to customize how credit information is presented in a borrower’s report and consistently provides turnaround times that are among the industry’s fastest. It is particularly known for dedicated customer support specialists focused on helping lenders maintain the highest levels of borrower service. Informative Research has earned PCI and EI3PA compliant certifications for achieving the highest levels of security and data privacy.

“While a borrower’s ability to qualify for a reverse mortgage is not dependent on his or her numerical credit score, HUD’s Financial Assessment rules require reverse mortgage lenders to carefully consider the borrower’s ability to meet financial obligations,” Peel said. “That’s why offering lenders the ability to order credit reports from within RVX has a significant impact on efficiency.”

Consumer Balances And Write-Off Performance

According to the latest Equifax National Consumer Credit Trends Report, non-mortgage credit balances in November 2014 totaled $3.1 trillion, the highest level in more than five years. By vertical, year-over-year balance increases include:

>> Auto: 9.6% ($965.0 billion);

>> Retail-issued credit cards: 4.8% ($71.0 billion); and

>> Bank-issued credit cards: 4.7% ($611.7 billion).

In addition, the total balance of non-mortgage write-offs year-to-date for November 2014 was $73.4 billion, the second-lowest level in eight years. Similarly, the total balance of home-finance write-offs year-to-date in November was $91.2 billion, also the second-lowest level in eight years.

“The Great Deleveraging has clearly ended and U.S. Consumers are back in the borrowing business, but how they borrow has greatly changed from prior to the Great Recession,” said Amy Crews Cutts, Senior Vice President and Chief Economist at Equifax. “Today, while auto loans make up 30.9% of non-mortgage consumer debt –  just as they did in December 2007 at the Recession’s start – student loans have grown from 20.2% to a whopping 37.3% and bank- and retailer-issued credit cards are down to 21.9% of consumer debt from 31.4%.”

Cutts continued, “One way to read this change is that consumers now value investment (in their education and durable goods like cars) over immediate consumption, which is good for our economy over the long run.  But, with the exception of new car production, sluggish consumption slows economic growth in the short-term, partially explaining the slower-than-hoped-for economic recovery.”

Other highlights from the most recent Equifax data include:

Auto Loans:

>> The total number of outstanding loans year-to-date in November was more than 70.0 million, the highest level in more than five-years;

>> Auto loan serious delinquencies, defined as loans 60 days or more past due, stood at 1.04% in November as a share of balances, a decrease from 1.15% from the same time a year ago;

>> The total number of new auto loans originated between January and September 2014 was 19.2 million, an increase of 4.7% versus the same period a year ago; in that same time, the total balance of new credit originated was $391.6 billion, an increase of 7.0%.

Retail-issued Credit Card:

>> The total number of new retail card accounts issued January-September was 28.5 million, a year-over-year increase of 2.5% and the highest since 2007;

>> The total balance of new credit originated in that same time was $48.1 billion, a six-year high and an increase of 3.4%;

>> In November, write-offs as a percentage of total balances were 7.44%, a year-over-year decrease of 0.34 percentage points (34 basis points).

Bank-issued credit card

>> Total new credit originated year-to-date in September was $183.9 billion, a six-year high and an increase of 25.9% from same time a year ago;

>> The total number of new cards issued year-to-date in that same time was 37.7 million, also a six-year high and an increase of 20.1%;

>> The write-off rate as a percentage of total balances outstanding in November was 3.47%, down from the 3.94% rate for November 2013;

>> The total number of bank-issued credit cards outstanding in November was more than 359.6 million, a five-year high and an increase of more than 4.7% from November of 2013.

Home Finance

>> Delinquent first mortgages, those 30 days or more past due, represented 4.54% of outstanding balances in November, a decrease from 5.87% from the same time a year ago;

>> The total balance of seriously delinquent first mortgages (90 days past due or in foreclosure) was $198.8 billion in November, a decrease of more than 29.8% year-over-year and the lowest level in more than five years;

>> Total balances on home equity installment loans was $139.9 billion in November, a decrease of 15.9% from the same time a year ago, while the total number of loans outstanding dropped to 4.6 million;

>> Total balances outstanding on home equity lines of credit (HELOCs) in November 2014 was $515.4 billion, a decrease of 3.6% from same time a year ago and a five-year low. The total number of HELOCs outstanding fell to 11.1 million, the lowest total in 10 years;

>> Delinquent balances (30 days or more past due) on HELOCs represented 2.37% of outstanding balances in November, down from 2.70% a year ago.

>> Delinquent balances on home equity installment loans fell 0.77 percentage points from November 2013 to 2.45% in November 2014.

The Credit Situation

According to the latest Equifax National Consumer Credit Trends Report, the total limit of new credit for bank-issued credit cards leads origination growth in January 2014, followed by home equity revolving lines and auto lending.Changes in the total balance of new credit originated January 2013-2014 include:

>> Bank-issued credit cards: 28.5% increase ($15.2 billion to $19.5 billion);

>> Home equity revolving: 18.4% increase ($6.2 billion to $7.3 billion); and

>> Auto: 19.8% increase ($28.6 billion to $34.3 billion).

“Spring is here and consumers’ desire for credit appears to be rising alongside the mercury,” said Amy Crews Cutts, Chief Economist at Equifax. “Despite the relatively low numbers of new and used vehicles sold in January, auto originations were up nearly 20 percent from the same time last year. This suggests that consumers are responding positively to the generous terms and greater credit availability in the auto space. Credit card and Home Equity Revolving Lines of Credit originations were also up sharply over the previous year, further signaling that not only are consumers interested in credit, but that banks are more willing to offer it.”

Other highlights from the most recent Equifax data include:

Bank-issued credit card:

>> The total number of loans outstanding in March 2014 is more than 320 million, the highest since September 2009;

>> Similarly, the total aggregate credit limit for bank cards in March 2014 is more than $2.5 trillion, a 55-month high;

>> From March 2013-2014, write offs as a percentage of total balances decreased 13.2% (from 4.77% to 4.14%); and

>> The total number of new cards issued in January 2014 is 3.7 million, a six-year high and an increase of 18.6% from same time a year ago.

Home equity revolving lines:

>> The total number of new loans in January 2014 is 71,600, an increase of 10% from same time a year ago;

>> The total outstanding balance of existing loans in March 2014 decreased 6.5% from same time a year ago;

>> Of total severely delinquent balances, 69% are from loans originated from 2005-2007; and

>> The total balance of severely delinquent loans in March 2014 is slightly more than $8 billion, a five-year low.

Auto:

>> The total number of new loans originated in January 2014 is 1.8 million, an eight-year high and an increase of 4.7% from same time a year ago; and

>> The total balance of auto loans outstanding in March 2014 is up 10.3% from same time a year ago ($874 billion). The total number of loans outstanding is 6.1% higher (63 million). Both are nine-year highs.

Let’s Learn From The Auto Industry

The best people are always open to new ideas. They’re always learning. So, I like to bring in topics on other industries that I think you might learn a bit from. In this case, I learned that the auto industry is doing some interesting things that the mortgage industry might try.

I was told that Fiserv’s Automotive Loan Origination System (LOS) was used by dealers and lenders to process more than 13.6 million credit applications in 2013, an increase of 16.5 percent over the previous year. More than 4.6 million contracts were funded on Auto LOS – a 14.3 percent increase over 2012 — of which nearly 900,000 were electronic contracts (e-contracts). 2013 was the first full year that e-contracting capabilities were integrated into the company’s end-to-end solution for automotive loan origination.

This substantial volume of credit applications and funded contracts reflects the slow return to health of the U.S. automotive industry, which registered robust growth in sales and financing for both new and used cars and trucks. The growing adoption of e-contracting mirrors the automotive industry’s transition to new technology and digital lending. E-contracting systems enable auto dealers to submit an electronically signed contract to a lender, greatly reducing the time needed to approve and fund loans, minimizing errors and leading to improved customer satisfaction. Are you listening Mr. Mortgage Lender?

“Increasing automobile sales and the recovering economy contributed to the impressive growth of credit applications and contracts supported by our Automotive Loan Origination System,” said Kevin Collins, president, Lending Solutions, Fiserv. “Captives and their dealers realized the role that technology can play in reducing costs, improving customer satisfaction and facilitating faster decision-making. This led to the impressive volume gains and growing adoption of e-contracting processes.”

By using e-contracting through Automotive LOS from Fiserv, auto dealers have been able to realize same-day or next-day funding and approval of contracts, a significant improvement over the laborious and slow paper-based contract process.

Fiserv technology gives lenders access to tools that help them better understand their borrowers’ financial situation, and offers a holistic view of their entire lending portfolios so they can make smarter lending decisions and close more deals. The efficient and error-free execution of e-contracts helps lenders reduce costs by eliminating paper, deliver high-quality service and remain competitive in today’s auto finance market.

Fiserv’s Automotive Loan Origination System is a solution for automotive loan origination, from electronic application capture through credit processing, funding verification, validation and booking of new loans and leases. The system assures a fast and efficient origination process, enforces compliance, mitigates risk and promotes profitable growth by lowering processing costs without sacrificing quality for quantity.

Mortgage lenders just might learn a thing or two from what these auto lenders are doing in my humble opinion.

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The Unknown

You can Download this article as a PDF HERE

TME-RBiundoThe current regulatory and economic environment has heightened the need for insightful and compliant decisioning tools, and lenders need deep and robust consumer information in order to improve portfolio stability and make more informed lending decisions. The best indicator of future behavior has always been – and continues to be – past behavior. To acquire this level of insight, lenders must leverage technology to identify potential bankruptcy risk, understand past consumer behavior and maximize profitability. By utilizing technology tools such as real-time, tradeline-level analytics, lenders can understand consumer behavior patterns and potential risk to determine the best strategies and opportunities for their borrowers.

24 Months: The Sweet Spot

If lenders want to truly obtain an insightful view of a borrower, using analytics with data across a 24-month playing field is crucial. Detailed consumer level information such as balance, payment, credit limit or account type provides insight that can identify and predict a borrower’s future credit behavior. Incorporating this borrower data into acquisition, portfolio and review strategies assists lenders in mitigating risk and offering relevant opportunities to specific borrowers.

For example, the ability to predict an individual’s propensity to pay within a certain timeframe can drive specific marketing strategies and opportunities to enhance customer loyalty. Analyzing a borrower’s credit behavior over a 24-month period can help identify unique sets of trends and characteristics, such as:

>> Spending patterns;

>> Payment patterns; and

>> Credit utilization – established patterns and impact of changing behavior.

Historical, trended data allows for better decisioning across the entire lifecycle – from acquisition to account management to collections. Data-rich technology tools like this provides lenders with the consistent information needed to identify and implement borrower-specific actions.

The Game of Risk

Past behavioral insight is readily available to lenders who leverage the right technology in order to confidently predict the future behavior of a consumer. Plus, analytic tools like scores and models can be leveraged in the portfolio monitoring process to predict the risk that a borrower may file for bankruptcy.

Scores and models tailored specifically to predict bankruptcy allows lenders to distinguish potentially profitable customers from those who are more likely to file for bankruptcy. Using a score with comprehensive, tiered segmentation schemes allows lenders to independently evaluate bankruptcy risk.  Scores such as these can support account management since it assists with enhanced segmentation and treatment or collection strategies.

Powerful Technology, Powerful Decisions

The recession may have altered the consumer credit landscape, but insight into a borrower’s potential to incur bankruptcy and to predict future credit behavior is available for lenders in order drive profitable decisions and effectively manage portfolios despite the stringent regulatory environment. Lenders are better enabled to strategically and effectively expand borrower pools through the use of technology tools like real-time, tradeline-level analytics. Managing borrower risk and predicting their future behavior by utilizing data-rich technology can help improve business performance and ensure more consistent outcomes.

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Are People Over Spending Again?

*Are People Over Spending Again?*
**By Tony Garritano**

TonyG***People buying things they could not afford with credit instead of available cash was a leading contributing factor to the mortgage meltdown. Americans are too comfortable about going into debt. Here’s what’s happening today: According to Equifax’s latest National Consumer Credit Trends Report, the total balance of bank credit cards increased slightly over the year ending July 2013 (from $533.3 to $536.5 billion), realizing the first year-over-year increase in 5 years.

****For other verticals, year-over-year changes in balances include:

****>> Student loan: increased 11.3% (from $794.6 billion to $884.2 billion);

****>> Auto: Increased 10.9% (from $745.3 billion to 826.8 billion);

****>> First mortgage: decreased 0.9% (from $7.79 trillion to $7.72 trillion);

****>> Home equity installment: decreased 4.1% (from $142.3 billion to $136.5); and

****>> Home equity revolving: decreased 8.9% (from $553.2 billion to $504.1 billion).

****“Only two major consumer credit segments are currently growing: auto financing and student loans,” said Equifax Chief Economist Amy Crews Cutts. “In all other segments, consumers are reducing their debt burdens, either negatively, through foreclosures and bankruptcies or positively, through payoffs – payoffs are dominating in most cases today. We expect mortgage balances to begin rising again over the next several months as new home purchase loans overtake foreclosures and payoffs.”

****Other highlights from the most recent data include:

****Bankcard:

****>> Serious delinquencies represent 1.86% of outstanding balances in July 2013, a decrease of more than 11% year-over-year;

****>> The total of new credit opened between January-May 2013 is the highest since 2008 and an increase of more than 6% from same time a year ago ($72.9 billion to $77.7 billion);

****>> From January-May 2013, the total number of new loans also increased more than 6% from same time a year ago, from 15.6 million to 16.6 million; and

****>> Both new loans and new credit year-to-date in May 2013 are five-year highs.

****Student Loan:

****>> The total number of student loans originated January-May 2013 is 4.2 million, a decrease of 9.3% from same time a year ago;

****>> In that same time, the total balance of new credit is $24.3 billion, an increase of nearly 4% from same time a year ago;

****>> More than 60% of new student loans in May 2013 were distributed to borrowers between the ages of 24 and 39, a modest decrease from the same period last year; and

****>> The total amount of write-offs year to date in July 2013 is $11.6 billion, an eight-year high and an increase of more than 58% from same time a year ago.

****Home Finance:

****>> The total balance of home finance write-offs year-to-date in July 2013 is $96.3 billion, a decrease of more than 22% from same time a year ago and the lowest since 2007;

****>> First mortgages in severe delinquency (30-days past due) represent 6.24% of outstanding balances, a decrease of 22% from the same time last year;

****>> Similarly, the total balance of first mortgages 90-days past due or in foreclosure is less than $310 billion, a five-year low and a decrease of more than 25% from same time a year ago; and

****>> By loan type, severely delinquent balances (90-days past due or in foreclosure) for home equity revolving ($8.3 billion) and home equity installment ($4.4 billion) in July 2013 are five-year lows.

Do You Know Your Borrowers Really?

*Do You Know Your Borrowers Really?*
**By Tony Garritano**

TonyG***Surely there’s more we can do as an industry to “know” the borrower besides relying on a standard credit score, W2s and bank statements. We can and should do better. Thankfully several entities are being creative and launching innovative methods and tools to better understand each and every borrower, if only lenders would use them. For example, Equifax launched a new product,Equifax Dimension, which delivers a more in-depth picture of past credit behavior in order to better predict future credit trends. Using this new solution, lenders can see up to two-years’ worth of detailed consumer credit activity allowing them to make more precise and profitable lending decisions.

****Equifax Dimensions analyzes hundreds of detailed payment characteristics to identify consumer patterns by industry and account type. Users can access 24 months of consumer balance, payment and credit utilization data to differentiate behaviors and maximize consumer insight in their decisions.

****Equifax Dimensions has a direct positive impact on lenders’ and service providers’ acquisition, origination, account management and analytics strategies, enabling them to:

****>> Identify which consumers are most likely to open accounts;

****>> Predict how much and where consumers are likely to spend;

****>> Create an indicator for credit line increases and the likelihood for staying current on payments following an increase;

****>> Determine ratio of spend against certain factors, like balance or payment;

****>> Identify propensity of a consumer to accept a balance transfer;

****>> Predict capacity to incur additional debt while staying current;

****>> Determine “breaking point” of spend that will lead to default; and

****>> Evaluate credit risk to better preempt default and/or bankruptcy

****“Equifax Dimensions gives our customers a window to look further into consumer credit trends so that they can make more informed lending decisions to therefore increase profitability,” said John Cullerton, Senior Vice President, Product Innovation and Management, Equifax. “This new product is … a simple way to help our customers increase their bottom line, while still effectively taking care of the consumer.”

Is Credit Finally Getting Looser? Don’t Believe It

*Is Credit Finally Getting Looser? Don’t Believe It*
**By George Yacik**

NEW-GeorgeY***Several articles have been written recently about the Federal Reserve’s recent lender survey, which raised hopes that banks have started to ease underwriting on residential mortgage loans. I’m sorry, but I just don’t see it, either in the market at large or in the Fed’s report on the subject.

****And until we do see some genuine loosening, the recovery in the mortgage and housing markets is going to continue to limp along and not move into high gear, no matter how low interest rates go and how long they stay there.

****It’s true that the Fed did find some loosening in its latest Senior Loan Officer Opinion Survey on Bank Lending Practices. But you need a high-powered microscope to see it.

****“On balance, a few (my emphasis) domestic banks reported having eased standards on prime residential mortgages over the past three months,” the Fed report said. Specifically, “a modest net fraction of banks were more likely to approve an application with a FICO score of 720 and a 20% down payment.”

****That doesn’t sound like a whole lot to get excited about.

****By comparison,“lending standards for nontraditional mortgages were little changed,” the report added. “Most banks indicated that their willingness to approve GSE-eligible home-purchase loan applications to borrowers with FICO scores of 680 or 720 was about unchanged relative to a year ago.”

****“Overall, only small numbers of domestic respondents reported changes in either standards or demand for any type of residential real estate lending during the previous three months, with the exception of a significant net fraction of banks that indicated that the demand for prime mortgages had picked up,” the report concluded.

****Hardly a cause for celebration, in my view. The Fed’s findings essentially come down to this: it’s now slightly easier to get a loan if you already had no trouble getting one, but for just about everyone else, nothing much has changed, in fact, it may have gotten even worse.

****Indeed, the Fed also found that about a third of lenders “indicated that they were less likely to approve home-purchase loan applications insured by the Federal Housing Administration with relatively low FICO scores,” meaning between 580 and 620.

****Those findings jibe with my own research. Lender after lender has told me that if anything, underwriting guidelines – in the form of overlays – have gotten more stringent recently, not less so, even though at the same time Fannie Mae and Freddie Mac have slightly loosened up their own requirements.

****Probably the biggest reason for that, of course, is that lenders are more worried than ever about Fannie and Freddie requiring them to repurchase loans that are less than perfect. Fully “three-fourths of banks cited the risk of put-back of delinquent mortgages by the GSEs as an important factor restraining their current ability or willingness to approve home-purchase loans,” the Fed report said, adding that “a large fraction of banks reported an increase in the importance of this factor over the past year.”

****Many lenders also haven’t taken any comfort from the rise in property values and homeowner equity over the past year or so. The Fed found that three out of four banks surveyed say their outlook for home prices or the economy at large are at “least somewhat important factors currently restraining” their real estate lending.

****But perhaps most important of all, lenders just don’t have much faith in the profitability of mortgage lending. Four out of five banks told the Fed that the “risk-adjusted profitability of the residential mortgage business relative to other possible uses of funds” was an important factor in their restraining mortgage lending, while a “large fraction of banks also reported an increase in the importance of this factor over the past year.”

****I can think of one reason why mortgage lenders are worried about the profitability of their business: They’re not making enough loans!

****While it’s certainly understandable that lenders are cautious, given what happened after the mortgage bubble burst, I think it’s fair to say that they’ve now gone way overboard in the opposite direction, denying loans to lots of creditworthy people.

****So, while it’s all well and good that the Fed is keeping mortgage rates at 4% or lower, it can’t do a whole lot to make lenders loosen up, even a little bit.

****“President Obama needs to use his bully pulpit to convince the big banks – the same institutions who were bailed out – to loosen lending requirements, and until that happens, all the government programs imaginable will only have a limited positive impact,” says Gloria Shulman, a mortgage broker in Beverly Hills.

****I’m not sure even the President can do that. Lenders have to take that step.

Updated Data Scoring Application Emerges

*Updated Data Scoring Application Emerges*
**Checking Accuracy**

***Loan quality is the name of the game these days. To this end, Plug&Score, a business division of Scorto Corporation, has released an updated version of the Plug&Score credit scoring and risk management solutions. The Plug&Score solutions family consists of scorecard development software Plug&Score Modeler, credit scoring system Plug&Score, and loan origination system Plug&Score Loan Origination.

****“We’ve been most thorough at analyzing feedback from Plug&Score users,” says Dmitry Krivonosov, Technical Developments Director at Plug&Score’s R&D Centre. “Our vision was to go beyond increasing performance speed and adding to scorecard modeling capabilities. We have designed the whole set of new features to provide a simple, robust and efficient way of dealing with data insights.”

****Lenders, especially microfinance organizations, are facing the strong need for a reliable risk evaluation tool. Plug&Score solutions allow financial organizations to improve credit portfolio quality and deliver swift and confident service to their customers. The updated versions of Plug&Score are already rolled out to the current 250+ users. The updates have been delivered at no cost.

****Plug&Score solutions integrate scoring models into decisioning and risk management processes. Scorecard development software Plug&Score Modeler, credit scoring system Plug&Score and loan origination system Plug&Score Loan Origination allow users to make informed credit decisions and optimize their risk exposure.

****More features of the updated version of Plug&Score solutions include:

****>> A new mode is added to the workflow: Raw Data Processing;

****>> Data anomalies (missing values, wrong type values, numeric outliers) are detected automatically;

****>> Numeric columns with few values (e.g. 1, 2, 3) are automatically transformed to categorical ones;

****>> Results of raw data processing are displayed: anomaly values, detected columns, distributions, data statistics;

****>> Data analysis options can be defined by user;

****>> The user can merge several categories to a single one;

****>> The user can delete certain categories (all rows that contain the deleted category will be excluded);

****>> The user can rename categories and columns;

****>> The user can change the type of a column manually (e.g., transform numeric column to categorical one); and

****>> The dataset can be abridged to a lower amount of rows while keeping data distribution same as in the original dataset.