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105 105 GOVERNMENT INVESTMENT PROPERTY PRESERVATION SERVICING TECH Follow Us At: @DSNewsDaily BETTER PREDICTING MORTGAGE DEFAULT Credit scores alone are not enough to determine the likelihood of default, Fitch Ratings notes, as a variety of factors can complicate the default risk process. In a report, Fitch discusses how consistency is needed in this process. "Assessing downside risk of U.S. consumer credit can be more difficult if different versions of credit scores are used when lending, underwriting standards are relaxed amid a supportive economy, or when lenders are reaching for growth," Fitch Ratings says. "As these dynamics can be exacerbated during an economic downturn, it is essential to view credit scores in combination with other key risk variables to most accurately assess default risk." According to Fitch, higher FICO scores are indicative of a more solid repayment history of debt obligations, with a lower probability of default. However, different versions of credit scores have been introduced post-crisis that are not used consistently across asset classes and providers, which complicates comparing these scores and has prevented their widespread use in credit analysis. Current higher FICO score trends in mortgages are partly attributable to a higher percentage of originations from the prime segment following the financial crisis amid the benign economic environment. Borrowers are paying their bills, as is to be expected given strong labor markets, rising wages, and low unemployment and interest rates. FICO scores are also improving as a result of the extended duration of the favorable economic environment, as past payment history with higher delinquency levels falls off. Much of the market is reliant on older FICO versions. Fitch notes that the mortgage industry uses older versions like FICO 2, 4, and 5 when assessing creditworthiness for new mortgages and deciding interest rates, while the newer FICO versions are currently not used by the mortgage market. Newer versions, such as FICO 8, which is commonly used in other industries, factors in on-time payments, account balances, and length of credit experience when calculating scores. FICO 9 differs when it comes to collections, factoring in rental payment history while putting less weight on delinquent medical collections. THE STATES LEADING IN NATIONWIDE DELINQUENCY RATE DROPS e overall delinquency rate was 3.8% nationwide in September, down from 4.4% a year earlier and the lowest for the month of September in more than 20 years, according to the latest CoreLogic Loan Performance Insights Report. Five states, CoreLogic notes, reported even larger decreases in their delinquency rates. Year-over-year, the states that logged the largest decreases included: Mississippi (-1.1 percentage points), North Carolina (-1.1 percentage points), Louisiana (-1.0 percentage points), New Jersey (-1.0 percentage points) and South Carolina (-1.0 percentage points). CoreLogic notes that the decreased activity in the Carolinas may be due in part to a recovery from the elevated levels in 2018 in the wake of Hurricane Florence. While overall delinquency fell, serious delinquency rates have begun to flatten out at low levels. e serious delinquency rate, defined as 90 days or more past due, including loans in foreclosure, was 1.3% in September 2019, down from 1.5% in September 2018. Likewise, the share of mortgages that were 30 to 59 days past due—considered early-stage delinquencies— was 1.9% in September 2019, down from 2.2% in September 2018. e share of mortgages 60 to 89 days past due was 0.6% in September 2019, down from 0.7% in September 2018. Some of the highest delinquency rates were in metro areas including New York and Miami, though Miami still experienced annual declines. e New York metro had the highest rate at 5.1%, while Miami, with the second- highest rate at 5%, saw a sharp decrease in the overall delinquency rate, falling from 6.1% in September 2018. In a previous report, Molly Boesel, Principal, Economist, Office of the Chief Economist at CoreLogic stated that four of the five states with delinquency rate increases also had increases in unemployment rates. "Job loss can trigger a loan delinquency, especially for families with limited savings," said Dr. Frank Nothaft Chief Economist for CoreLogic. "e rise in overall delinquency in Iowa, Minnesota, Nebraska and Wisconsin coincided with a rise in state unemployment rates between August 2018 and August 2019."

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