Encompass Lending Group and Equity Resources, Inc. Adopt FICO Score 10 T

Rhea-AI Summary

FICO has announced that Encompass Lending Group and Equity Resources, Inc. are adopting the new FICO® Score 10 T credit scoring model. This decision comes through their membership in Lenders One® Cooperative, a national alliance aiding independent mortgage bankers, banks, and credit unions. The FICO Score 10 T model is designed to enhance lending decisions, reduce delinquencies, and increase mortgage loan approvals. Equity Resources, Inc., licensed in 20 states and the District of Columbia, aims to leverage this model to qualify more veterans for VA home loans. Encompass Lending Group, serving 46 states plus the District of Columbia, seeks to expand homeownership opportunities using this model. FICO claims that the Score 10 T model can boost mortgage originations by up to 5% and reduce default risk by up to 17%, offering more precise credit risk management.

Positive

• Adoption of FICO Score 10 T by Encompass Lending Group and Equity Resources, Inc. offers enhanced predictive power for lending decisions.
• Potential increase in mortgage originations by up to 5% without additional credit risk.
• Reduction in default risk and losses by up to 17%, leading to better credit risk management.
• Expansion of homeownership opportunities, especially for veterans qualifying for VA home loans.

Negative

• None.

Insights

Financial Analyst

The adoption of FICO Score 10 T by Encompass Lending Group and Equity Resources, Inc. signifies a noteworthy advancement in their credit risk evaluation processes. This model's enhanced predictive capabilities can lead to a 5% increase in mortgage originations without incurring additional credit risk, or alternatively, a 17% reduction in default risk and losses. These improvements in risk management could enhance the financial stability of these lenders, potentially leading to more favorable terms for borrowers and improved profitability for the lenders.

Furthermore, the ability to project cash flow more accurately can also be a significant benefit. For stakeholders, this means more reliable financial forecasting and possibly reduced volatility in earnings reports. However, it's imperative to closely monitor how these projections translate into actual performance over time.

Market Research Analyst

The inclusion of FICO Score 10 T allows Encompass Lending Group and Equity Resources, Inc. to leverage the latest in predictive analytics, setting them apart from competitors still relying on older models. This proactive approach may position them as more attractive options for borrowers who seek minimized delinquency risks and better approval odds. From a market position standpoint, the adoption of this scoring model might boost their brand image as innovative and forward-thinking lenders.

Additionally, integrating this advanced scoring model may attract a larger pool of borrowers, including those who might not have been approved under traditional scoring models. This can help expand the customer base and diversify the revenue streams. However, it remains to be seen how quickly the market and borrowers will respond to this change.

Credit Risk Specialist

From a credit risk perspective, the adoption of FICO Score 10 T could signal a reduced risk profile for Encompass Lending Group and Equity Resources, Inc. The enhanced predictive power of this model means that these lenders can identify high-risk borrowers more accurately, thereby improving their lending decisions. This can lead to a higher quality loan portfolio and possibly lower provisions for loan losses.

However, while the new scoring model offers significant potential benefits, it's important for these lenders to carefully manage the implementation and integration process. Early-stage challenges and initial costs of adopting new technology can sometimes offset the anticipated benefits. Moreover, ongoing monitoring and adjustments will be necessary to ensure that the model delivers on its promises in real-world scenarios.

Lenders One® Cooperative members will use FICO’s newest, most innovative and predictive credit scoring model to help reduce delinquencies and increase mortgage loan approvals

BOZEMAN, Mont.--(BUSINESS WIRE)-- FICO, a leading analytics software firm, has announced that Encompass Lending Group and Equity Resources, Inc. are the latest mortgage lenders to embrace FICO’s newest, most innovative and predictive scoring model, FICO^® Score 10 T. Their proactive adoption of the model stems from FICO’s strategic relationship with Lenders One® Cooperative (“Lenders One”), of which both lenders are members. Lenders One is a national alliance of independent mortgage bankers, banks, and credit unions dedicated to helping its members maximize revenue, reduce costs, and improve decision-making.

Equity Resources, Inc. is a privately held mortgage lender headquartered in central Ohio and licensed in 20 states plus the District of Columbia. Equity Resources, Inc. originates traditional conventional financing but also specializes in FHA, USDA and VA lending, with a balanced approach of selling directly to the GSEs plus aggregators. Based in the greater Houston, TX. area and serving 46 states and the District of Columbia, Encompass Lending Group is a full-service mortgage lender. Notably, Encompass Lending sells 100% of its loans to aggregators rather than government-sponsored enterprises (GSEs). With FICO^® Score 10 T’s ability to support application approval lift and reduce delinquencies, both organizations will use the model to enhance their respective origination efforts.

“Our proactive adoption of FICO Score 10 T will enable us to stay one step ahead of the industry,” said Kelly Welch, executive vice president of Equity Resources, Inc. “We are eager to put the model into action and potentially utilize it to allow more veterans to qualify for VA home loans. We will also use it to compare to the traditional models and expand homeownership into new channels of business.”

“At Encompass Lending Group, we strive to help as many people as possible achieve a dream of homeownership,” said Paul Marsh, chief financial officer of Encompass Lending Group. “Proactively adopting the industry’s most innovative scoring model will further our ability to safely and responsibly deliver on our commitment to our customers.”

FICO^® Score 10 T provides even greater precision in making lending decisions and can help lenders better manage credit risk and default rates when extending competitive credit offers to consumers. The model can enable an increase in mortgage originations of up to 5% (without taking on additional credit risk) or reduce default risk and losses by up to 17%. The increased predictive power of FICO Score 10 T can also help lenders project cash flow more accurately.

“With FICO Score 10 T, Encompass Lending Group and Equity Resources, Inc. will be positioned to serve their customers with tools of the highest industry standards,” said Joe Zeibert, vice president of Mortgage and Capital Markets at FICO. “We are proud to partner with these forward-looking organizations as they continue to grow their businesses and meet the needs of borrowers.”

This news builds upon FICO’s recent announcement around mortgage industry adoption of FICO^® Score 10 T reaching a significant milestone: Clients with over $125 billion in annualized mortgage originations and approximately $380 billion in eligible mortgage portfolio servicing rights have signed on to use the model.

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 200 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 more than 100 countries do everything from protecting 4 billion payment cards from fraud, to improving financial inclusion, to increasing supply chain resiliency. The FICO^® Score, used by 90% of top US lenders, is the standard measure of consumer credit risk in the US and has been made available in over 40 other countries, improving risk management, credit access and transparency.

Learn more at https://www.fico.com.

Join the conversation at https://x.com/FICO_corp & https://www.fico.com/en/blogs/.

For FICO news and media resources, visit https://www.fico.com/en/newsroom.

FICO is a registered trademark of Fair Isaac Corporation in the U.S. and other countries.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240701629685/en/

Media Contact

Julie Huang

press@fico.com

Source: FICO

FAQ

What is the impact of Encompass Lending Group adopting FICO Score 10 T?

Encompass Lending Group's adoption of FICO Score 10 T aims to enhance lending decisions and expand homeownership opportunities, potentially increasing mortgage originations by up to 5% and reducing default risks by up to 17%.

How will Equity Resources, Inc. benefit from FICO Score 10 T?

Equity Resources, Inc. will use FICO Score 10 T to qualify more veterans for VA home loans and improve lending decisions, potentially increasing mortgage originations and reducing default risks.

What is FICO Score 10 T's projected influence on mortgage originations?

FICO Score 10 T can potentially increase mortgage originations by up to 5% without added credit risk, while also reducing default risk and losses by up to 17%.

Why did Encompass Lending Group and Equity Resources, Inc. adopt FICO Score 10 T?

Both organizations adopted FICO Score 10 T to leverage its enhanced predictive power for better credit risk management, aiming to reduce delinquencies and increase mortgage loan approvals.