mortgage comparison: Majority of Mortgage Lenders Will Implement Analytic
Solutions to Reduce Mortgage Re-Defaults
Tue Oct 13, 2009 found at reuters.com
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New Research Report Examines Best Practices in Mortgage Credit Risk Management
to Increase Profitability
MINNEAPOLIS--(Business Wire)--
With minimal resources available to them, few mortgage servicers have invested
sufficiently in data management and predictive analytics to adequately identify
borrowers most at risk --but this appears to be changing, according to new
research conducted by TowerGroup, a leading research and advisory firm, and
distributed by FICO (NYSE:FICO), a leader in analytics and Decision Management
technology.
The study, released at the 96th Annual Mortgage Bankers Association Convention
&
Expo, is published in the FICO Mortgage Credit Risk Manager`s Best Practices
Handbook. It assesses the current state of mortgage credit risk management best
practices among leading institutions, analyzing the strategic application of
technology in financial services based on a survey of senior mortgage credit
risk managers who collectively account for 58 percent of first-mortgage
outstanding debt.
Findings show that many more loan servicers are moving toward a stronger
implementation of analytical tools, with half saying they are currently
implementing a solution, and another 20 percent evaluating solutions with the
intent to implement them in the next six to 12 months. Executive management is
taking note: 72 percent of survey respondents said their management has
tightened its focus on credit risk management; the same number said they have
had organizational restructuring to increase focus on distressed assets.
In a risk-averse environment, lenders have responded with more conservative loan
underwriting practices - yet these practices are too often applied to all loan
applicants, putting lenders in jeopardy of losing their best clients. The report
suggests that use of customer segmentation analytics will be critical in order
to keep clients and maintain profitability. Yet while most institutions have
begun to increase spending on analytic and reporting tools, only 24 percent have
significantly increased their IT spending budgets.
Additionally, with high demand for loan modification, servicers are under
increasing pressure to execute unprofitable transactions in order to keep people
in their homes, all the while trying to manage their own portfolios to be
lucrative enough to stay in business. In these cases, adapting and adding
technology for loan modification programs can be critical. Many are already
implementing these technologies, with two-thirds using net present value
software to automate required borrower eligibility guidelines for government
loan-modification programs. Yet only 36 percent are using decisioning technology
to compare alternative loan forbearance programs and decide on the optimal
program option.
"Mortgage servicers have seen intense pressure from all sides to reduce
re-default rates and keep people in their homes, all the while trying to find
ways to better manage risk in order to reduce losses," said Craig Focardi,
senior research director, TowerGroup. "There`s no question that changes
within
the industry need to be made, and for this reason, focus on mortgage credit risk
management has moved from the back office to the C-suite. In particular, the
survey examines the power analytics can have to identify smart cures for default
risk in order to improve lenders` operational efficiency, and ultimately, the
bottom line."
"We`ve gained invaluable experience working with mortgage lenders and
servicers
through our FICO Mortgage Recovery Initiative (FICO MRI)," stated Joanne
Gaskin,
FICO director of Mortgage Scoring Solutions. "We commissioned this study to
more
fully understand the loan remediation challenges our clients face, and to gather
best practices for our clients to help them improve portfolio profitability and
reduce the loan modification re-default rate. By sharing what we`ve learned,
FICO can work even more effectively with our clients, bringing the power of
analytics and automation to help homeowners receive the most appropriate loan
treatment and help preserve homeownership."
The full FICO Mortgage Credit Risk Managers` Best Practices Handbook takes an
in-depth look at how the mortgage credit risk industry must revamp its processes
across the entire consumer credit life cycle, with deep insight into:
* A comparison of standard and best practices in mortgage credit risk management
* Specific steps financial institutions can take to better manage mortgage
credit risk
* Latest advances in technology to identify at-risk borrowers
* Best practices for optimizing portfolio net present value while reducing
re-defaults
* Integrating transactional data and predictive analytics
The FICOMortgage Credit Risk Manager`s Best Practice Handbook may be downloaded
online at: www.fico.com/handbook.
About FICO
FICO (NYSE:FICO) transforms business by making every decision count. FICO`s
Decision Management solutions combine trusted advice, world-class analytics and
innovative applications to give organizations the power to automate, improve and
connect decisions across their business. Clients in 80 countries work with FICO
to increase customer loyalty and profitability, cut fraud losses, manage credit
risk, meet regulatory and competitive demands, and rapidly build market share.
FICO also helps millions of individuals manage their credit health through the
www.myFICO.com website. Learn more about FICO at www.fico.com.
Statement Concerning Forward-Looking Information
Except for historical information contained herein, the statements contained in
this news release that relate to FICO or its business are forward-looking
statements within the meaning of the "safe harbor" provisions of the
Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
subject to risks and uncertainties that may cause actual results to differ
materially, including the success of the company`s Decision Management strategy
and reengineering plan, the maintenance of its existing relationships and
ability to create new relationships with customers and key alliance partners,
its ability to continue to develop new and enhanced products and services, its
ability to recruit and retain key technical and managerial personnel,
competition, regulatory changes applicable to the use of consumer credit and
other data, the failure to realize the anticipated benefits of any acquisitions,
continuing material adverse developments in global economic conditions, and
other risks described from time to time in FICO`s SEC reports, including its
Annual Report on Form 10-K for the year ended September 30, 2008, and its last
quarterly report on Form 10-Q for the period ended June 30, 2009. If any of
these risks or uncertainties materializes, FICO`s results could differ
materially from its expectations. FICO disclaims any intent or obligation to
update these forward-looking statements.
FICO, Blaze Advisor, TRIAD and Debt Manager are trademarks or registered
trademarks of Fair Isaac Corporation in the United States and/or in other
countries.
Media:
FICO
Steve Astle, 415-446-6204
stephenastle@fico.com
or
Access PR
Whitney MacDonald, 415-844-6294
wmacdonald@accesspr.com
or
Investors:
FICO
John Emerick, Jr., 800-213-5542
investor@fico.com
Copyright Business Wire 2009
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