"The research comes as a proposal to replace the longstanding tri-merge credit report with a single-file model has reignited debate over borrower costs, credit access and systemic risk. We are going through a modernization phase in the mortgage industry, Sanjeeban Chatterjee, director of behavioral modeling at AD&Co, said in a statement. At such times, it is important to understand the impact of the changes so that the stakeholders can make the right decisions."
"Score variances were most pronounced among lower-scoring borrowers. Among consumers with median scores between 600 and 639, 47% had at least one bureau score that differed from the tri-merge standard by 10 points or more. Another 26% saw differences of at least 20 points while 10.5% experienced gaps of 40 points or more."
"Andrew Davidson & Co. noted that for a $350,000 GSE loan with a 90% loan-to-value ratio, moving between adjacent pricing tiers due to a score shift could raise or lower the combined cost of the mortgage and mortgage insurance by $3,000 to $5,000 in present value over the life of the loan. Some proposals have suggested a 700 score cutoff to determine whether a tri-merge report would be required."
Score variances are most pronounced among lower-scoring borrowers. Among consumers with median scores between 600 and 639, 47% had at least one bureau score that differed from the tri-merge standard by 10 points or more; 26% differed by at least 20 points and 10.5% by 40 points or more. Some borrowers could fall below minimum qualification thresholds under a single-score framework. Roughly 30% of the 13 million scored consumers in the 620–639 range, including an estimated 240,000 GSE loans using VantageScore 4.0, could drop below a 620 cutoff and potentially be denied a GSE mortgage. Score shifts can also change pricing tiers and alter combined mortgage and mortgage insurance costs by several thousand dollars in present value.
Read at www.housingwire.com
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