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Overture Takes Second Look at Credit Risk

As the mortgage industry looks to restore investor confidence as well as its own tarnished image, Overture Technologies suggests that a concept called re-decisioning may be the answer.

"Today securitization is done with macros and spread sheets," said Linda Simmons, senior vice president of business development for Overture at the MBA National Secondary Market Conference here. "In order for the industry to reignite the investor has to know what the security is worth. It has to be obvious."

Overture contends that the industry can return to profitability by extending the role of automated decisioning beyond underwriting. More specifically, Overture recognizes the opportunity to leverage product and pricing eligibility as well as rules-managed decisioning in post closing, capital markets, loan modifications and many aspects of loan servicing to improve loss mitigation. With this added transparency and consistency provided through automated decisioning, investors can improve upon best execution as well as pooling and securitization efforts.

"The notion of re-decisioning is such that you have original data from the loan already. So, if you augment that data with new data you can have a better assessment of the collateral," noted Ms. Simmons. "We're not seeing a lot of re-underwriting going on today. I think it would help. Lenders should take more characteristics of the borrower like payment history, requests to extend credit, requests to refi and use that data to better evaluate that loan."

Another such piece of data needed would be an updated credit score. Realizing the need to revaluate loans, Equifax has released Mortgage Market Risk. By using this tool investors can analyze mortgage loan performance and more accurately assess delinquency and default.

This new tool gives investors updated credit information on mortgage borrowers aggregated at the ZIP-code level. Data then can be segmented to reveal borrower credit health and credit capacity trends for different loan vintages within a ZIP code. In addition to providing a powerful tool for assessing risk in a trading desk environment, Mortgage MRI also supports strategic market risk analysis, pool and market risk assessment and institutional valuation of mortgage-related assets.

Specifically, Mortgage MRI segments ZIP-code-level data by vintage, loan type and first mortgage payment status. Once the data is segmented, Mortgage MRI leverages leading indicators and scoring models, including VantageScore and Equifax's Bankruptcy Navigator Index to analyze credit risk and the likelihood of a certain borrower profile filing for bankruptcy over the next 24 months. The results are then aggregated and provided to subscribers. Credit is back in vogue," said Tom Madison, senior vice president, Equifax Mortgage Solutions.

"On the servicing side especially there is interest in this approach," added Ms. Simmons. "The idea is to put new data on the loan and use the existing seed data as well to create a better picture of where that loan is today." (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/