New research shows that analysis at the neighborhood level can lead to a more thorough insight of mortgage risk and better lending decisions.
As such, Collateral Analytics (CA), a provider of automated valuation solutions and real estate analytic products for mortgage lenders, has created new definitions for more than 300,000 neighborhoods throughout the U.S. – along with their corresponding names and shapefiles.
“We have found that these neighborhood metrics have considerable influence over the direction of home prices, the uncertainty behind value estimates of price and mortgage default rates,” says Michael Sklarz, president and CEO of Collateral Analytics, in a release. “These new neighborhood-level risk ratings are a result of our proprietary research and unique data sources.”
Recent research from the company shows that neighborhoods with more variability by age or size tend to be more difficult to value. This, in turn, can lead to higher appraisal costs and longer turn times.
In addition, default rates tend to be higher in neighborhoods with a propensity for more debt as a percentage of value – which makes foreclosure contagion a real risk.