Comprehensive Insights Lead to Better Outcomes for Lenders, Consumers and Communities–Equifax’s Craig Crabtree
Craig Crabtree is Senior Vice President and General Manager of Equifax Mortgage & Housing Solutions. In this role, he manages the company’s mortgage and rental businesses across all solution and product categories.
Since joining the company in 2010, Crabtree has expanded the capabilities that service these industries to include Employment and Income Verification Services, Capital Markets, and Property and Data Analysis. He has more than 30 years of mortgage industry experience, including origination, servicing, loss mitigation and capital markets expertise.
Home buyers are currently experiencing affordability challenges driven by higher interest rates, tighter inventory and elevated home prices. And the mortgage industry is seeking solutions to meet these challenges while making home loans easier and more affordable.
Over my 30-plus year career, I’ve seen the mortgage industry go through a number of cycles, but one thing has always remained consistent: more data is better, regardless of market conditions. Expanding the data and insights used in the mortgage lending process can help improve approval rates and reduce costs for the lender and consumer while expanding opportunities for more equitable housing.
To start, a tri-bureau credit reporting strategy continues to be the proven standard for the industry–and with good reason, as there can be as much as a 20-point difference in a consumer credit score on 15-plus percent of consumers across the three bureaus. That’s significant and could mean the difference between extending credit or not. Pair this with the addition of expanded alternative data sets to the credit file (including BNPL, telco and utilities data, rental payment data and rent-to-own/lease payment data), and lenders will have access to a more comprehensive view into a borrower’s true financial profile, which more often helps “lift” the credit profile of the consumer while mitigating payment risk.
Additionally, borrowers benefit from more affordable loan options and better customer experiences that comprehensive data profiles provide. Creating the most holistic view of a borrower’s financial picture can help consumers avoid thousands of dollars of costly loan level pricing adjustments (LLPA). Additionally, integrating data throughout the loan process can help automate processes and decisions that reduce costs for lenders while making the process faster and easier for consumers.
Finally, providing more pathways to homeownership for U.S. consumers is a goal the entire mortgage industry can rally behind. One way to help achieve this goal is by promoting the use of alternative credit scores and alternative data (such as rent, telco, utilities and even BNPL consumer loan payment history) to provide the most comprehensive credit profile possible, especially to historically underserved borrowers who may have no traditional credit, thin credit files or lack a traditional credit score.
For many consumers, the impact of the inclusion of more alternative data sets can be truly profound. According to recent data, as much as 30% of “thin file” consumers could potentially increase their traditional credit score if telco, pay TV and utilities attributes are included. Use of alternative data enables 21% of “credit invisible” consumers to become scorable and helps move 15% of credit-seeking consumers into the near-prime or prime score band, potentially qualifying them to receive more favorable offers or rates.
Industry research also indicates a strong correlation between positive consumer rent and utility payment history with future positive mortgage payment performance, and the Government-Sponsored Enterprises (GSEs) appear to recognize this as well. In March, it was noted that nearly 90% of lenders utilizing a leading automated underwriting system used positive rental payment history in the last 30 days to help assess first-time homebuyer eligibility for a conventional loan. This underscores the value that alternative data, like positive rent and utility payment history, can bring to the industry.
Expanding opportunities for equitable home ownership is critical for our communities too. Recent research from Habitat from Humanity underscores the positive power of home ownership: including stronger financial stability, increased civic participation, improved educational outcomes and better physical and mental health.
As an industry, we need to continue working together to find ways to expand the amount of information integrated into the mortgage loan decision to better serve consumers. Time and again it has been shown that richer profiles produce better outcomes – for lenders, for borrowers and for our communities.
(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)
