Most experts agree that 2013 is a critical year for the housing industry. The number of homes that are underwater (i.e., worth less than what is owed on the mortgage) continues to decrease; an uncertain regulatory climate is likely to become clearer; and there is even some growth in investor activity.
Sectors of the secondary market have been blamed for some of the housing industry’s problems, but secondary-market investors are critical to housing success. A robust secondary market for residential mortgages gives lenders access to capital and allows them to offer home loans at appropriate but reasonable terms. This is a boon, especially under current market conditions, marked by extremely tight credit and lending policies that prevent some borrowers who are good risks from qualifying for loans.
Further bolstering the secondary market is job number one at ASF 2013—the largest capital markets conference in the world—hosted this month by the American Securitization Forum. Conference attendees will discuss new innovations and ways to avoid the mistakes of the past.
One innovation in which VantageScore Solutions has contributed is the use of anonymous loan-level data by investors. Tracking borrowers’ credit-score performance and other risk indicators throughout a loan’s lifecycle facilitates greater transparency among securitized loan portfolios, and enables a more powerful risk management process.
For investors, the benefits to this breakthrough include the ability to benchmark deals, monitor changes in collateral and borrower health, and even determine the impact of strategic defaults.
For consumers, this means greater access to loans because it affords lenders greater access to capital. For the most part, lenders have relied on Fannie Mae, Freddie Mac and the FHA for this important function since the crisis began in earnest in 2007. This has contributed to very tight lending standards and many frustrations among consumers seeking mortgage loans.
For further reading, I encourage you to click here and take a look at an article we will pass out to all the attendees of ASF 2013. I am very much looking forward to discussing loan level data and the myriad of other issues that can move us forward towards a healthy housing market at ASF 2013.
And I’m happy to share with you insights from one of the major players in the industry: Tom Donatacci of Clayton Holdings, a market leader in both due diligence and surveillance, and a provider of a full spectrum of services for the mortgage-backed securities (MBS), asset-backed securities (ABS), and commercial mortgage-backed securities (CMBS) markets. Tom is our guest for the “Five Questions With” article, and a Q&A with him appears at the end of the newsletter.
Also in this month’s edition we include an article about the newly available and most recent edition of TradeLines, our biannual magazine covering the risk management and consumer lending industries, as well as an article congratulating a long-time friend of VantageScore Solutions: Maxine Sweet from Experian. Maxine was recently presented an award for her years of service as a financial educator.
Also included in this issue is an update on the Index of Banking Activity, and a “Did You Know” article focused on the importance of paying down holiday-related credit card debt.
I’m sure you will find all the information relevant and useful.