IN RELATIONSHIP WITH EQUIFAX, 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 historical telecommunications (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.”
The research data analyzed U.S. mortgages from January 2019 for consumers with non-traditional credit histories and found a strong correlation between positive consumer telco, pay TV and utility payment history and future positive mortgage payment performance. These findings hold true across a range of credit scores, most notably among potential borrowers in the high-end of the subprime (credit scores of 580-619) through lower prime (credit scores of 660-719) score bands, who traditionally have been more likely to face challenges in obtaining affordable mortgages based on their credit scores alone.
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 mortgage lenders to deny applications for credit or other services.
Equipped with these new data insights, both lenders and borrowers stand to benefit. For mortgage lenders, the addition of these differentiated consumer insights supports financial inclusion initiatives to expand the availability of credit to more borrowers - helping to unlock a pathway to homeownership for more Americans.
To download the free white paper from Andrew Davidson & Co., “A Look at Utility Payments and Their Positive Impact on Future Mortgage Performance,” click here.