Digital Risk Pinpoints Specific Lifestyle And Behavioral Attributes As Primary Indicators Of Loan Modification Redefault
CHICAGO, Oct. 22, 2012 /PRNewswire/ — Digital Risk, the nation’s largest provider of mortgage risk, compliance and transaction management solutions, today at the MBA Annual Convention released findings from the analysis of 100,000 loan modifications using the Veritas(TM) Borrower Segmentation Engine which models borrower behavior to predict the likelihood of redefault and provides the reasons why the event will occur. These findings validate borrower lifestyle and behavior modeling, which is becoming a standard metric in the modification and lending decision processes.
The Veritas Borrower Segmentation Engine represents a very aggressive form of borrower analysis. The Engine analyzes each borrower in depth and classifies him/her into one of 32 clusters and one of seven Meta Clusters, which are groups of clusters with common properties. Veritas uses over 120 attributes about the borrower, the property and the local real estate market to analyze and classify a borrower.
Findings from across Meta Clusters include:
- CLTV is not a definitive indicator of redefault: three of the best performing Meta Clusters have a CLTV far greater than 100% and are near equivalent to the worst performing
- Problem debt correlates quite strongly with redefault in six of seven Meta Clusters
- 56% of loan modifications were given to borrowers in the two Meta Clusters with the highest problem debt at the time of modification. These two Clusters redefaulted at the highest rates
- The two lowest redefaulting Meta Clusters received only 22% and 3% (respectively) of all modifications
“Linking financial behavior to lifestyle has significant implications,” said Peter Kassabov, Digital Risk chairman and CEO. “Through our Veritas Borrower Segmentation Engine, risk can be accurately assessed on the likelihood of loan modification redefault, first lien foreclosure and the future behaviors of a new mortgage origination. The availability of this data enables truly reliable lending decisions.”
This research shows that lifestyle exerts a profound influence on a borrower’s financial behavior, highly relevant now that borrowers are more strategic in their use of discretionary funds. Specifically, their attitudes on borrowing, servicing and prioritizing debt and which types of debt does are considered more relevant, more important and why.
About Digital Risk
Digital Risk is the largest provider of mortgage risk and compliance management solutions. The company provides buyers and sellers of mortgages and mortgage backed securities the analytical, technological and risk management services they need to achieve their goals. The Digital Risk platform delivers transparency at the loan level and precise risk assessment throughout the entire mortgage value chain. With over 1,400 U.S. based professionals, the company counts the nation’s leading servicers, originators, aggregators and investors among its clients. Digital Risk is independent and not affiliated with any originator, issuer, servicer or investor. Headquartered in Orlando, Digital Risk has additional operations in New York, Dallas, Denver, Chicago, Boca Raton and Jacksonville.
Contact: Brandie Young
SOURCE Digital Risk