FICO and Equifax have introduced BEACON Mortgage Score, a new FICO industry score specifically designed to help mortgage lenders make the best possible risk decisions when addressing both current and prospective homeowners.
Equifax plans to make the new score available in April to mortgage lenders and servicers for use in their loan servicing decisions, including mortgage loan modifications.
The new score builds upon the predictive power the current BEACON credit risk score. By focusing specifically on mortgage risk performance, FICO scientists have developed a version of the BEACON score with significantly greater power for assessing mortgage repayment risk.
In early validation testing, the performance of BEACON Mortgage Score was compared to that of the general risk BEACON score when predicting mortgage repayment risk specifically. The new score identified up to 25% more of the high-risk mortgages and home equity lines of credit that later became seriously delinquent, the companies say.
FICO and Equifax say these early results suggest that the use of BEACON Mortgage Score by the industry potentially can save it $1 billion in foreclosure costs and help keep an estimated 115,000 more struggling homeowners in their homes.
"One of the goals of our alliance with Equifax is to bring both companies' assets and expertise to bear on the uncertainty facing lenders, borrowers and investors," says Lisa Nelson, vice president of global scoring solutions for FICO. "This new score is one of the first fruits of that alliance, and it couldn't be more timely or valuable for mortgage lenders, loan servicers and the securitization industry."
BEACON Mortgage Score retains the same 300-850 scoring range, minimum scoring criteria, and inquiry treatment as previous versions of the BEACON score. However, to increase its predictive strength, FICO's new scoring model assesses several additional data variables derived from Equifax consumer credit files, selected specifically to predict mortgage repayment risk. As a result, the model includes 15 additional score reason codes that help lenders understand and explain the scores.
SOURCES: FICO, Equifax