BankAmerica, Countrywide Credit Industries, and Fleet Mortgage Group are testing a new service from Equifax Mortgage Information Services Inc. meant to help assess default risk throughout the life of a mortgage.
Martin Wahl, director of product development for the Equifax Inc. unit, said the model used for scoring in the system draws only on mortgage data and thus is more predictive of mortgage behavior than if general consumer models were.
By analyzing more than four million mortgagor records from its national credit data base, Equifax "identified those characteristics that are most strongly associated with future delinquent mortgage payment behavior," Mr. Wahl said.
He also said the evaluation capability, called the Mortgage Portfolio Review Service, could be useful to people who need to do valuations in connection with mergers, acquisitions, and divestitures.
Mr. Wahl said it could be especially valuable to lenders in helping them deploy more personnel to handle accounts with high delinquency likelihood and away from those with low delinquency scores.
The 230 factors used in the scoring process are much the same as those used in other types of scoring, he said. They include items such as number of times 30 days late in the last two years and credit limit versus amount of credit outstanding.
"The sample we developed was from mortgagors, and the behavior we are monitoring is the mortgage payment record," he said. He added that on home loans, unlike other types of credit, the scoring cannot make a credit decision, because it does not assess the collateral in the home.
The capability is expected to be more widely used on portfolios. "We've established benchmarks for comparing portfolios for default characteristics. For example, they explain a lot of the difference between defaults on government portfolios and others."
