Sponsored Content from Equifax: The Potential Positive Impact of Telecommunications, Pay TV and Utility Payment Data on Mortgage Lending

Craig Crabtree is Senior Vice President and General Manager, Mortgage & Housing for Equifax. He has spent nearly three decades in the mortgage industry – with his experience spanning origination, servicing, loss mitigation and capital markets.

Expanding access to credit and supporting financially inclusive lending are initiatives the entire mortgage industry continues to focus on. Working together, the industry is helping to facilitate greater inclusion in the mortgage lending process by introducing more tools, technology advancements, and access to data to provide visibility to millions of consumers.

While credit reports continue to provide an indication of credit history and past financial behaviors, reviewing various forms of differentiated data sets, such as telecommunications (telco), pay TV and utilities insights, can help provide greater visibility into a borrower’s financial profile and increase opportunities for homeownership for more than 191 million American consumers, 80 percent of whom, according to Equifax, have traditional credit files but may benefit from additional insights into their financial profile.

The majority of U.S. adults have at least one utility bill or cell phone in their name, making utility data a widespread and powerful indicator of past financial reliability. Anonymized Equifax research into the potential benefits of telco, pay TV and utilities attributes found that among 255 million U.S. consumers, 30 percent could potentially increase their traditional credit score if the attributes are included – helping to increase access to credit. According to Equifax research, millions of subprime consumers could also see an average increase of approximately 30 points from use of the additional data, moving them into the near-prime score band and potentially enabling them to receive more favorable offers or rates.

Andrew Davidson & Co., the leading provider of risk analytics and consulting for residential loans, Agency Mortgage-Backed Securities (“MBS”), and credit-sensitive securitizations, has been researching the relationship between telco, pay TV and utility payment information and its positive impact on future mortgage performance. 

“Our research has confirmed strong analytical support for the use of utility attributes in assessing potential mortgage risk,” said Andrew Davidson, President of Andrew Davidson & Co. “We identified encouraging performance data in our research that shows a strong correlation between past favorable utility payment history and future mortgage performance. It’s even more pronounced when multiple utility attributes are considered. Such impacts have the potential to increase access to mortgages for underserved groups. Utility attributes also have the potential to streamline the underwriting process and help more consumers secure loans by contributing to a more complete financial profile.”

This research analyzed several months of data, spanning April 2018 through January 2019, for consumers that have thin, young, “stale” (no recent activity), or nonexistent credit histories and found a strong correlation between positive consumer utility payment history and future positive mortgage payment performance. The firm’s research also confirmed that this holds true across a range of credit scores, most notably among potential borrowers in the 600-700 interval, who traditionally have been more likely to face challenges in obtaining affordable mortgages based on their credit scores alone. Thus, utility attributes have the potential to streamline the underwriting process and help more consumers secure loans by contributing to a more complete financial profile.

In addition to incrementally increasing responsible lending, positive utility information can potentially lower mortgage rates for borrowers who might otherwise be overcharged and/or find the offered rates prohibitive.

It is important to note that these Fair Credit Reporting Act (FCRA)-compliant insights provide anonymized information to streamline the mortgage application process and this differentiated data cannot be used by lenders to deny applications for credit or other services.

Armed with these new data insights, the impact on both lenders and borrowers could be profound. For mortgage lenders, the addition of these differentiated consumer insights supports financial inclusion initiatives to expand the availability of credit to more borrowers; and for borrowers, this can serve as an important step in establishing individual financial health for generational wealth, changing the trajectory of families and communities by offering a true pathway to homeownership.

(Sponsored content includes material submitted independently of the Mortgage Bankers Association and MBA NewsLink and does not connote an MBA endorsement of a specific company, product or service. For more information about sponsored content opportunities, contact Bill Farmakis at bill@jlfarmakis.com or 203/834-8832.)