CrossCountry Mortgage Adopts FICO® Score 10 T, Providing Forward Looking Insights for Mortgage-Backed Security Investors
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Insights
The adoption of FICO® Score 10 T by CrossCountry Mortgage (CCM) represents a significant shift in the assessment of borrower risk in the mortgage industry. This new scoring model incorporates a more nuanced analysis of credit data, potentially leading to a more accurate prediction of borrower behavior. From an investor's perspective, the introduction of mortgage-backed securities (MBS) based solely on this scoring model could alter the risk profile of these investment vehicles.
Investors will need to recalibrate their models to factor in the different risk assessments that FICO Score 10 T presents. This could lead to a re-pricing of MBS as the market adjusts to the new information. In the short term, there may be volatility as investors learn to interpret the new score's implications. Over the long term, if the score proves to be more predictive, it could reduce default rates and improve the overall quality of MBS portfolios.
CCM's pioneering move to issue MBS based on FICO Score 10 T could instigate a broader industry trend, as other companies may follow suit to remain competitive. This adoption can be seen as a response to market demand for more accurate and predictive financial instruments. The shift may also influence consumer behavior, as borrowers become aware of the new scoring model's impact on their ability to secure financing.
For the $12 trillion MBS global market, the enhanced score's predictive capabilities could attract new investors seeking more reliable risk assessment tools. This could increase market liquidity and potentially lower interest rates for borrowers if the perceived risk of MBS decreases. However, the transition to FICO Score 10 T must be managed carefully to avoid market disruption.
The introduction of FICO Score 10 T by CCM is a strategic move that underscores the importance of credit scoring accuracy in risk management. The new model takes into account trended credit data, offering a more dynamic assessment of a borrower's creditworthiness over time, rather than a static snapshot. For the industry, this could mean a shift in underwriting practices, as lenders may need to update their systems and processes to integrate the new score.
From a risk management perspective, the enhanced score could lead to more granular segmentation of borrowers, allowing for more tailored and potentially more competitive loan products. However, there may be challenges in the initial phase, such as aligning investor understanding with the new risk assessments and ensuring that rating agencies are equipped to evaluate MBS based on the updated scoring model.
First Mortgage Lender Committed to Issuing Mortgage-Backed Securities Exclusively Based on FICO Score 10 T
Additionally, CCM is the first mortgage lender to commit to issuing mortgage-backed securities (MBS) exclusively based on FICO® Score 10 T. This move will enable investors to update their guidelines to accept the most predictive score for MBS and allow the
As an industry leader and first to adopt FICO Score 10® T, CCM’s commitment to the scoring model is leading the way for a growing number of companies to adopt the model as well.
"By proactively issuing mortgage-backed securities exclusively based on FICO Score 10 T, we’re helping to empower investors to make smarter decisions,” said Jenn Stracensky, CCM Chief Operating Officer. “We’re excited about the opportunities that the use of FICO Score 10 T will provide as we continue to offer personalized solutions to our customers.”
FICO Score 10® T provides even greater precision in making lending decisions. FICO Score 10 T can help lenders better manage credit risk and default rates when extending competitive credit offers to consumers. Compared to the version of the FICO® Score used by the Enterprises today, FICO® Score 10 T can enable an increase in mortgage originations of up to 5 percent (without taking on additional credit risk) or reduce default risk and losses by up to 17 percent. The more predictive FICO Score 10 T also helps lenders project cash flows more accurately.
“CrossCountry Mortgage’s astute decision to adopt FICO Score 10 T demonstrates its commitment to innovation, credit access and responsible business growth," said Julie May, vice president and general manager of Scores at FICO. “By leveraging FICO’s most predictive credit scoring model, CCM is at the forefront of meeting the needs of today’s borrowers and investors.”
FICO is committed to assisting mortgage industry participants looking to transition to its most current model, FICO® Score 10 T. The FICO Score Migration Resource Center provides a detailed guide to support organizations through their score transition with key planning steps and activities, in addition to implementation best practices.
About FICO
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 220 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, insurance, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in nearly 120 countries do everything from protecting 2.6 billion payment cards from fraud, to improving financial inclusion, to increasing supply chain resiliency. The FICO® Score, used by
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About CrossCountry Mortgage
CrossCountry Mortgage (CCM) is the nation's number three retail mortgage lender, with more than 7,000 employees operating over 800 branches and servicing loans across all 50 states. Our company has been recognized ten times on the Inc. 5000 list of America's fastest-growing private businesses and has received many awards for our standout culture. We offer more than 120 mortgage, refinance and home equity solutions – ranging from conventional and jumbo mortgages to government-insured programs for Veterans and rural homebuyers – and we are a direct lender and approved seller and servicer by Freddie Mac, Fannie Mae, and Ginnie Mae. Through our dedication to getting it done, we make every mortgage feel like a win. Visit ccm.com.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240109564879/en/
FICO US PR Team
Julie Huang
press@fico.com
Source: FICO
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