Equifax Measures Mortgage Default Likelihood
Equifax Measures Mortgage Default Likelihood
Equifax Measures Mortgage Default Likelihood
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February 11, 2011 (Chris Moore)
mortgage-credit-scores-image
Equifax has introduced a new method of calculating a borrower’s behavior and identify the likelihood of a mortgage default. It’s a new metric called “default distance” and it measures the time lapse, in months, between when a borrower defaults on revolving debt, such as credit card or auto payments, and when a borrower first starts the foreclosure process.

Putting their metric to the test in a recent study, Equifax found that revolving debt defaults consistently occurred before first mortgage loan defaults with the time span between them decreasing over time based on which states were hit the hardest by the economic recession and the housing market collapse.

Equifax linked anonymous borrower credit information to CoreLogic loan-level, mortgage-backed securities data to measure default distance at every point in the life of all non-agency securitized loans. Analysis was performed utilizing Federal Housing Finance Agency home price data on mortgage loans for borrowers with only one mortgage outstanding and revolving debt included credit card and home equity lines of credit.

A positive number indicates a borrower defaulted on a revolving debt first while a negative number indicates a borrower defaulted of their mortgage first.

States that have consistently had the highest foreclosure rates and hit hardest in the economic downturn like California, Florida, and Michigan had the shortest “default distances,” all less then five months, while states that have faired better economically like Texas and South Dakota had the longest “default distances,” about 15 months.

The study partially debunks the myth that high credit scores are an indicator of future credit risk as the study found that someone with respectable credit may default on their mortgage soon after they default on the revolving credit.

“In general, borrowers in these score bands consistently pay all their credit obligations on time,” Equifax said. “However, when these borrowers default on one account, many of them end up defaulting on multiple other accounts at the same time.”

Overall, the average default distance has decreased since 2005 entailing that less time elapses between revolving debt default and mortgage default.

In the end it simply proves the theory that even people with high credit scores can just as easily go bust when facing difficult economic conditions like loss of income or loss of employment.

Tags: equifax, corelogic, fhfa, mortgage loans, mortgage defaults, revolving debt, foreclosure process, default distance, credit risk, high credit scores

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Estimate your monthly mortgage payment
Auto Loan
Calculator

Determine how much car you can afford before buying
Learn About
Mortgage Loans

Learn about the different types of home loans
15 Year vs 30 Year
Loan Comparison

Compare 15 year and 30 year mortgage loans
Todays Mortgage
Rates

See today's mortgage rates. Shop, compare and save.

February 11, 2011 (Chris Moore)
mortgage-credit-scores-image
Equifax has introduced a new method of calculating a borrower’s behavior and identify the likelihood of a mortgage default. It’s a new metric called “default distance” and it measures the time lapse, in months, between when a borrower defaults on revolving debt, such as credit card or auto payments, and when a borrower first starts the foreclosure process.

Putting their metric to the test in a recent study, Equifax found that revolving debt defaults consistently occurred before first mortgage loan defaults with the time span between them decreasing over time based on which states were hit the hardest by the economic recession and the housing market collapse.

Equifax linked anonymous borrower credit information to CoreLogic loan-level, mortgage-backed securities data to measure default distance at every point in the life of all non-agency securitized loans. Analysis was performed utilizing Federal Housing Finance Agency home price data on mortgage loans for borrowers with only one mortgage outstanding and revolving debt included credit card and home equity lines of credit.

A positive number indicates a borrower defaulted on a revolving debt first while a negative number indicates a borrower defaulted of their mortgage first.

States that have consistently had the highest foreclosure rates and hit hardest in the economic downturn like California, Florida, and Michigan had the shortest “default distances,” all less then five months, while states that have faired better economically like Texas and South Dakota had the longest “default distances,” about 15 months.

The study partially debunks the myth that high credit scores are an indicator of future credit risk as the study found that someone with respectable credit may default on their mortgage soon after they default on the revolving credit.

“In general, borrowers in these score bands consistently pay all their credit obligations on time,” Equifax said. “However, when these borrowers default on one account, many of them end up defaulting on multiple other accounts at the same time.”

Overall, the average default distance has decreased since 2005 entailing that less time elapses between revolving debt default and mortgage default.

In the end it simply proves the theory that even people with high credit scores can just as easily go bust when facing difficult economic conditions like loss of income or loss of employment.

Tags: equifax, corelogic, fhfa, mortgage loans, mortgage defaults, revolving debt, foreclosure process, default distance, credit risk, high credit scores

FILL OUT THE FORM
It all starts here. Select the loan product you want to apply for and complete the subsequent questionnaire.
WE VERIFY & TRANSMIT TO LENDERS
Once we receive your completed questionnaire we verify a couple vital pieces of information and direct your information to our network of lenders, all within minutes.
REVIEW YOUR OFFERS
With offers in hand you can now compare rates and costs and get the best possible deal. Comparison shopping made easy. You fill out one form and lenders compete for your business.
CHOOSE YOUR LENDER
Congratulations! With the great learning tools we provide for you at LoanRateNetwork and the offers you have received, you've found the right product and the best rate.
HOW LOANRATENETWORK
LOAN CENTER WORKS
ADVANTAGES OF USING
LOANRATENETWORK
FAST & EASY. DATA ENCRYPTED
Applying to multiple lenders is fast and easy with our one simple questionnaire. Choose the product you’re looking for, take a few moments to answer a few questions and you’re on your way to saving.
NO OBLIGATION. NO HIDDEN FEES
Any of the services on our website are 100% free, there is no obligation to use our services or any hidden fees. We’re not loan brokers so we don’t charge broker fees like other websites.
NO SSN OR CREDIT CHECK
No SSN or credit check is necessary to use our services. We bring lenders to you so they can compete for your business and you save. That information only becomes necessary after you choose a lender.
Helpful Tools

February 11, 2011 (Chris Moore)
mortgage-credit-scores-image
Equifax has introduced a new method of calculating a borrower’s behavior and identify the likelihood of a mortgage default. It’s a new metric called “default distance” and it measures the time lapse, in months, between when a borrower defaults on revolving debt, such as credit card or auto payments, and when a borrower first starts the foreclosure process.

Putting their metric to the test in a recent study, Equifax found that revolving debt defaults consistently occurred before first mortgage loan defaults with the time span between them decreasing over time based on which states were hit the hardest by the economic recession and the housing market collapse.

Equifax linked anonymous borrower credit information to CoreLogic loan-level, mortgage-backed securities data to measure default distance at every point in the life of all non-agency securitized loans. Analysis was performed utilizing Federal Housing Finance Agency home price data on mortgage loans for borrowers with only one mortgage outstanding and revolving debt included credit card and home equity lines of credit.

A positive number indicates a borrower defaulted on a revolving debt first while a negative number indicates a borrower defaulted of their mortgage first.

States that have consistently had the highest foreclosure rates and hit hardest in the economic downturn like California, Florida, and Michigan had the shortest “default distances,” all less then five months, while states that have faired better economically like Texas and South Dakota had the longest “default distances,” about 15 months.

The study partially debunks the myth that high credit scores are an indicator of future credit risk as the study found that someone with respectable credit may default on their mortgage soon after they default on the revolving credit.

“In general, borrowers in these score bands consistently pay all their credit obligations on time,” Equifax said. “However, when these borrowers default on one account, many of them end up defaulting on multiple other accounts at the same time.”

Overall, the average default distance has decreased since 2005 entailing that less time elapses between revolving debt default and mortgage default.

In the end it simply proves the theory that even people with high credit scores can just as easily go bust when facing difficult economic conditions like loss of income or loss of employment.

Tags: equifax, corelogic, fhfa, mortgage loans, mortgage defaults, revolving debt, foreclosure process, default distance, credit risk, high credit scores

HOW LOANRATENETWORK
LOAN CENTER WORKS
FILL OUT THE FORM
It all starts here. Select the loan product you want to apply for and complete the subsequent questionnaire.
WE VERIFY & TRANSMIT TO LENDERS
Once we receive your completed questionnaire we verify a couple vital pieces of information and direct your information to our network of lenders, all within minutes.
REVIEW YOUR OFFERS
With offers in hand you can now compare rates and costs and get the best possible deal. Comparison shopping made easy. You fill out one form and lenders compete for your business.
CHOOSE YOUR LENDER
Congratulations! With the great learning tools we provide for you at LoanRateNetwork and the offers you have received, you've found the right product and the best rate.
ADVANTAGES OF USING
LOANRATENETWORK
FAST & EASY. DATA ENCRYPTED
Applying to multiple lenders is fast and easy with our one simple questionnaire. Choose the product you’re looking for, take a few moments to answer a few questions and you’re on your way to saving.
NO OBLIGATION. NO HIDDEN FEES
Any of the services on our website are 100% free, there is no obligation to use our services or any hidden fees. We’re not loan brokers so we don’t charge broker fees like other websites.
NO SSN OR CREDIT
CHECK
No SSN or credit check is necessary to use our services. We bring lenders to you so they can compete for your business and you save. That information only becomes necessary after you choose a lender.