The controversial practice of using credit scores to evaluate mortgage applications has taken a new turn that may encourage even reluctant lenders to adopt the practice.

Some big lenders that have introduced the automated scoring systems into their screening of mortgage applicants have also started using the technology in evaluating portfolios they buy or sell.

Other industry participants, such as mortgage insurers, are making scoring systems widely available for portfolio management and evaluation.

As a result, industry experts say, all lenders are feeling pressure to adopt credit scoring for loans they originate.

"Eventually, the market will force lenders to adopt credit scoring to come to terms with the rest of the industry," said Douglas Duncan, senior economist at the Mortgage Bankers Association of America. "They'll have to evaluate their portfolios to have the same information" as the buyers or sellers they hope to do business with.

Credit scores are numerical ratings that are used in predicting the likelihood of a borrower's default. The scorecard approach was developed decades ago for auto loans and other forms of consumer credit, and has played a major role in the increasingly aggressive and focused marketing of credit cards.

With its recent extension into mortgages, the practice has raised the hackles of consumer groups and some lenders who contend that scoring discriminates against marginal borrowers.

Many lenders have also expressed fears about using human judgment to override poor credit scores. They believe they may be forced to buy back such loans as a result of post-purchase reviews by buyers, or in the event that the loans go bad.

Mr. Duncan said some of the fears are overblown. He sees benefits for lenders, saying credit scoring would identify potentially problematic loans and allow for early remedies.

He also said borrowers would be shielded from adverse impacts once a loan is originated.

"I don't see any way lenders could use a retrospective credit score to return the loan to the borrower," he said.

Citicorp and Citizens Bancorp are both enthusiastic users of credit scoring.

Citicorp Mortgage applies a scoring system to loans that it considers purchasing for servicing, said Michael Shaw, director of risk management at Citicorp Mortgage. "It improves our risk assessment."

Indeed, lenders can use credit scores to obtain the best deals when they are selling loans, said Dusty Lashbrook, senior vice president at Citizens Mortgage Corp.

At a recent industry conference, Mr. Lashbrook said lenders could score loans and then "sell those that might have a bit more potential for default.

"I guarantee people are thinking or looking at this a bit," Mr. Lashbrook said. "You could be adversely selected by a seller yourself."

Citicorp and Citizens also find other uses for the scoring system.

Citicorp Mortgage Co. has even combined behavioral analysis with credit scores in the hope of predicting whether customers will refinance.

Citicorp would also score any acquisitions it might make, Mr. Shaw said.

Citizens Mortgage uses credit scoring to help map out collection strategies. Loans with low scores are much more of a concern, and therefore prioritized for action, Mr. Lashbrook said.

Citizens also applies credit scores to loans that it receives from brokers and correspondents, Mr. Lashbrook said. "It's very enlightening when you look at it that way."

Other bankers see cross-selling opportunities arising from credit scoring. Lenders could, for instance, offer other credit products to borrowers who receive high mortgage scores.

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