Personalized Borrower Analytics Up

New York-Going forward some executives say there will be growth in demand for behavior-based technology that provides more personalized borrower information analytics.

"Many wheels" are in motion to address the current distressed borrower challenge, Linda Simmons, general manager, mortgage finance at Overture Technologies Inc. Bethesda, Md., told this publication after attending an industry meeting at the Department of Treasury.

Data show the success rate among traditional modifications is one in 10, compared to one in five for those using technology, she says, so taking advantage of new and existing tools is key to the overall success of the Obama plan. She expects behavior-based tools will take precedence, especially when dealing with borrowers "under water."

Overture has been working with clients who favor the use of a behavioral model provided by First American Subordinate Lien Outsourcing, Westlake, Texas. "It measures not only the borrower's capacity to repay but their willingness to repay as well."

As reported, recent research findings suggest that "under water" borrowers with mortgages at least 10% or higher than the current value of their home are inclined to succumb to voluntary or "strategic" defaults and foreclosure posing a great danger to the future health of the mortgage market.

When FASLO was created a few years back, its president Jason Pinson said the ability to take First American's extensive data and manage it through FASLO's technology, analytics and expertise would help create "unique solutions," including behavior-based tools. It evaluates behavioral traits such as when borrowers pay the bills, their payment priorities and other individualized behavior analytics.

Since the company specializes in buying second liens, initially the program was developed to serve that market niche, Ms. Simmons said, but now it is updated for use in other markets. "For example GMAC is using it to qualify borrowers for loan modifications. It's flexible and easy to use. They are having considerable success" in keeping borrowers who have some interest in staying in the home. Typically, she says, for common sense reasons like the schools their kids attend. The commute to work is ideal, or the property is near family members who can help with the children. Apparently, such life conveniences outweigh the pressure of the crisis, "even if they are more than 10% under water on the LTV to UPB ratio."

"There are enough of these LTV to UPB mismatches regionally and nationally to make one hope there are new and innovative ways to keep borrowers in their homes and this seems to be one of them."

This solution is one of various effective tools addressing the challenges both servicers and borrowers are facing.

Another example, Mr. Simmons says, is Residential Credit Solutions Inc., whose executive Kelly O'Bannon reported an 85% borrower contact rate and a 75% success rate with second and third payments on Home Affordable Modification Program loans. "They are really doing well."

Fair Isaac Corp., Minneapolis, also provides a consumer credit behavior feedback tool. The FICO Mortgage Recovery Initiative is based on the Making Home Affordable guidelines. It enables borrowers and lenders control the foreclosure prevention and management process by helping ensure the authenticity of a FICO score, which is a primary requirement of HAMP.

Features include the "Mortgage Risk Analyzer," which identifies mortgage loan holders who are likely to default or need assistance before they become delinquent and has the ability to integrate with another website that allows the management of large volumes of loan remediation requests.

Using the Mortgage Response Analyzer, advanced analytics servicers can design borrower outreach campaigns, while the "Mortgage Portfolio Optimization" helps lenders match loan product offers with at-risk customers.

One of the benefits for MRI users is the ability to contact Fair Isaac partners such as the Homeownership Preservation Foundation, a national network of HUD-certified counseling agencies, Money Management International, a full-service credit counseling agency, and Equifax. Lenders and servicers are charged normal prices for products and services they receive under FICO MRI.

"The complexities of the current mortgage situation present tremendous challenges for consumers, loan servicers and the secondary market," said Craig Focardi, senior research director for TowerGroup.

"What is needed is a holistic view of credit health, combined with intelligent analytics that ultimately result in better informed consumers and a financially sound business model for lenders and investors. Comprehensive services that integrate all parties to the loan modification transaction more closely link credit education components with lending decision management solutions to derive the most optimal overall outcome."

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