Optimism grows among US lenders

Are US bankers embracing the economic recovery? According to our latest quarterly survey of 200+ US risk officers, it certainly looks that way. This sentiment is in sharp contrast to the grim forecast expressed in our recent survey of European risk managers. The US survey showed that risk managers expect...

Four out of five European bankers see another recession coming

The latest European Credit Risk Outlook, published by FICO and Efma today, provides a grim forecast for Europe. More than 100 credit risk management professionals across Europe answered the survey in January and February, and here’s some of what they said: 79 percent of respondents forecast a new European recession...

Score differences across credit bureaus reflect true data differences

I recently had the pleasure of speaking at the Philadelphia Federal Reserve Bank’s Community Development Studies and Education Department’s conference “The Impact of Workout Options on Borrower’s Credit Reports and Scores.” The conference was well attended by regulators, lenders and consumer credit and housing counselors. FICO’s research on the score...

How do you treat a strategic defaulter?

As I've mentioned previously on this blog, strategic defaulters have a unique set of characteristics not found among other defaulters. That means traditional account management and collections methods are less effective with them. So what's a mortgage servicer to do? Segment populations based on the dual dimensions of credit risk...

FICO Analysis: Strategic Default Problem Grows

A recent FICO data analysis found more than six million U.S. homeowners have a current-loan-to-value ratio of 120 or higher, meaning they are at least 20 percent underwater on their mortgages. Based on recent data from Fannie Mae, these homeowners are more than twice as likely as other borrowers to...

Is it really all doom and gloom in the U.S. housing sector?

In our latest quarterly survey of U.S. bank risk professionals, respondents offered an outright dismal picture of the housing sector. When asked if U.S. housing prices would climb back to 2007 levels before the year 2020, 49 percent of respondents said no. By comparison, only 21 percent said yes. And...

Bloomberg TV: FICO CEO on Consumer Confidence and the Recovery (video)

On Bloomberg Television's "Countdown," FICO CEO Mark Greene discusses U.S. consumer credit, credit card use, and the U.S. and U.K. housing markets. To watch the video above, view it here.

Concern about housing sector still running high

In our latest quarterly survey of bank risk professionals, we found a strong negative outlook for the housing sector. Of course, this isn’t new. It continues a trend we’ve seen for a long time. While 18% of respondents expected mortgage delinquencies to decline over the next six months, 46% expected...

New Mortgage Standard Must Be Predictive

A major debate underway in our nation’s capitol hinges on how federal regulators choose to define a “Qualified Residential Mortgage” (QRM). Opposing sides agree on one thing: this decision could fundamentally change America’s real estate industry. After researching a key component of the debate, FICO has found a significant flaw...

Bloomberg TV: FICO CEO Discusses Jobs Data, Economy

FICO CEO Mark Greene discusses the June U.S. jobs report, and the outlook for the housing market and consumer confidence on Bloomberg Television's "InBusiness With Margaret Brennan." (Source: Bloomberg) If you're unable to see the video above, view it here.

Mortgages are sore spot in European credit forecast

According to European credit risk managers in the second European Credit Risk Survey conducted by FICO and Efma, the delinquency picture is mixed. Overall, respondents’ outlook for the next six months is mixed, but the results were slightly better than the last survey (February 2011) for most credit products. Where...

Strategic default: More than an ethics debate

Strategic defaults and the changing consumer stigma around defaulting on a mortgage make for an interesting ethical debate, argued in media outlets ranging from the Chicago Tribune to The PBS NewsHour. But ethics aside, let's not lose sight that strategic defaults have negative consequences for consumers, servicers and investors. Consumers...

Video: What's the profile of a strategic defaulter?

More American homeowners are choosing not to pay their mortgage, a phenomenon known as strategic default. In this video, Andrew Jennings, FICO's chief analytics officer, shares FICO Labs findings about new analytics for predicting strategic default and the profile of a strategic defaulter. If you have difficulties with the embedded...

Predicting strategic default

The incidence of strategic default is on the rise. But before mortgage servicers can take action, they first must be able to identify strategic defaulters. Standard credit risk scores aren't sensitive to the quite different characteristics of these voluntary strategic defaulters, whose behavior is driven by incentive to pay rather...

Who are your strategic defaulters?

Accurately predicting strategic default risk remains a big challenge for mortgage servicers. Because strategic defaulters behave differently from traditional mortgage defaulters, it's quite difficult for servicers to identify consumers with the greatest potential to strategically default. And after all, you can't predict what you can't measure. FICO recently conducted research...

FICO CEO on CNBC Squawk Box: Credit Where It’s Due

On CNBC Squawk Box, FICO CEO Mark Greene discusses results from a new FICO survey of risk managers, as well as key issues affecting US consumer credit health. For those who can't see the embedded video above, view it here.

Research looks at how mortgage delinquencies affect scores

How much impact does a short sale have on FICO® Scores? How about a foreclosure? Since I frequently hear these questions from clients and others, I thought I’d share new FICO research that sheds light on this very subject. The FICO study simulated various types of mortgage delinquencies on three...

Better risk prediction in mortgage servicing

Perhaps no other entity within financial services has been more challenged by the economic downturn than mortgage servicing. It’s not just that mortgage default severity is significantly higher than other consumer loan defaults. The changing nature of assessing consumer credit risk and declining property values has put huge pressure on...

Targeting strategic defaulters: to lend or not to lend?

In a piece on the TIME blog, Stephen Gandel comments on the New York Times article of 10 December, 2010 where credit card lender testing of sub-prime consumers was discussed. Mr. Gandel raises many good points about the quandary that banks find themselves in. The issue of lending to strategic...

Clearing away the fog around HELOCs

Home Equity Lines Of Credit are an odd hybrid, offering the convenience of revolving credit and the security of a real estate-backed loan. Perhaps that’s why lenders are sometimes puzzled about the role of HELOCs in calculating FICO® Scores. For instance, we often get asked whether HELOCs factor into the...

Taking On Strategic Defaults

Throughout the United States, lenders are attempting to identify and evaluate the creditworthiness of “strategic defaults”—those customers that have chosen to stop making mortgage payments because the mortgage was greater than the value of the residence. Many lenders are now asking: Are these customers prudent credit risks—or incredibly risky? Consumers...

Have mortgage underwriting standards become too strict?

Recently, Zillow.com questioned the tight loan requirements now in vogue among mortgage lenders. The company, an online marketplace where borrowers shop for mortgage rates and loans, says the tougher criteria "keeps a cap on housing demand, which is important for the greater housing market recovery." Certainly no one wants a...

How predictive is home depreciation?

It’s a common belief among lenders and news pundits that home price depreciation (HPD) is a top predictor of consumer repayment risk—perhaps even more so than a FICO® Score. The argument is that in today’s market, declining HPD must be affecting consumer risk behaviors. Many point to the growing number...

For mortgage relief, one size does not fit all

As noted in last Friday’s New York Times article, the well-intended Making Home Affordable Program that promised to help millions of borrowers is falling well short of that goal. The latest figures show that a total of 422,000 borrowers have been converted into permanent modifications, while 616,000 trial modifications have...

Assessing Risk for First-Time Homebuyers

It is a great time to be a first-time homebuyer. Interest rates are hovering at 4.5% for a 30-year fixed rate mortgage, and real estate values are beginning to stabilize. For lenders focused on providing credit to these new homeowners and growing origination volumes, new FICO research shows the benefits...

How do short sales affect a FICO® Score?

There appears to be quite a bit of confusion with consumers and mortgage professionals about how FICO® Scores consider and treat the reporting of a mortgage related short sale. In fact, I have seen and heard it be claimed that a short sale is not considered negative by the FICO...

FICO® Scores in mortgage lending — a few facts

When it comes to FICO® Scores for mortgage origination, several myths remain frustratingly hard to kill. Case in point: They resurfaced again in a recent column in the New York Times. It’s worth restating some of the plain facts about the use of FICO Scores in mortgage — facts that...

Risk drops for new mortgages

- Posted by Tom Quinn, FICO® Score Product Manager As reported in our latest FICO Labs News Flash, our analysis shows that risk on new residential mortgages in the U.S. is decreasing. Specifically, borrowers who opened new mortgages in May-June 2009 had much lower delinquency rates on those mortgages than...

Welcome to the FICO Banking Analytics blog — why are we here?

- Posted by Tom Quinn, FICO® Score Product Manager Today's bankers are information junkies. We should know - as the creators of the FICO® score and other predictive analytics solutions, we are constantly providing our clients with new research and insights into credit trends. We created this blog to share...