DefaultRiskIndex.com Data Shows Mortgage Originations Volumes Decreased from Previous Quarter with Slight Decline in Risk-Taking Consumption Overall

STAMFORD, Conn.--()--VantageScore Solutions, LLC, developer of the VantageScore® credit scoring models, today announced the fourth quarter 2017 update to its Default Risk Index (DRI) data series. The latest update reveals a drop in mortgage lending originations from the previous quarter while its default risk index (DRI) – a comparison of the total volume and weighted-average risk profile of quarterly originations – slightly and steadily increased over time.

Changes to specific index values are summarized in the following table:

CATEGORY    

TOTAL
ORIGINATIONS

   

TOTAL
ORIGINATIONS
VS. LAST
QUARTER

   

TOTAL
ORIGINATIONS
VS. SAME
QUARTER LAST
YEAR

   

PROBABILITY
OF DEFAULT
(WEIGHTED)

   

DEFAULT
RISK
INDEX

   

DRI VS.
LAST
QUARTER

   

DRI VS.
SAME
QUARTER
LAST YEAR

Auto 152,456,147,584 -5.3% 1.2% 3.75% 85.1 -3.1% -4.7%
Bankcard 87,625,835,728 -.6% 0% 2.69% 95.8 -1.9% -1.0%
Mortgage 402,155,623,138 -5.2% -17.5% 1.12% 96.6 3.7% 13.0%
Student 24,595,800,509 -50.1% -3% 18.1% 87.5 21.3% -2.8%
 

INDEX

For the third consecutive quarter, the risk profile of new auto originations became more conservative. The auto industry’s DRI of 85.1 remains significantly lower (i.e., less risky) than when the index began in 2013, while bankcard and mortgage loans remain only marginally below 2013 levels.

SNAPSHOT

Mortgage was the only category in the quarter to increase risk-taking both sequentially and year-over-year. This slight loosening coincided with a drop in originations of 17.5% as compared to the same quarter last year.

ORIGINATIONS

On a sequential basis, origination volumes declined across every category. While the steep decline in student lending is consistent with seasonal expectations, the decline in mortgage originations (5.2% vs. last quarter, 17.5% vs. last year) is more noteworthy.

Each risk profile is indexed to the beginning of the series, where the third quarter of 2013 equals 100. DRI profiles that are close to 100 show an equivalent risk activity to the 2013 benchmark; whereas DRI profiles that fall further from 100 distinguish risk activity that is either higher or lower than the benchmark (depending on the results).

About the Default Risk Index

The VantageScore Default Risk Index (DRI) and its website, DefaultRiskIndex.com, permit users to monitor the shifting quarterly risk profiles of loan originations in the mortgage, credit card, auto, and student loan categories. The DRI is derived using credit file data from TransUnion and VantageScore odds charts— tables furnished to VantageScore users that match values on the 300-850 VantageScore scale range with their corresponding probability of default (PD) values.

The Default Risk Index is a measure of relative changes in risk level, benchmarked against the third quarter of 2013, the first period for which data were compiled. Interactive tools at DefaultRiskIndex.com allow users to view trends for each loan category and freely download the data behind the charts.

The VantageScore Default Risk Index is provided as a free resource to institutional and individual investors, professionals in the securitization field, academics, and all others interested in systemic lending risk. It will be updated quarterly, with data reflecting loans issued in the preceding quarter.

VantageScore Solutions and TransUnion developed the DRI to highlight limitations in the traditional ways credit scores are used to evaluate risk for categories or pools of loans. Today’s common practices—using “weighted average” or “distribution by score band” to summarize risk— are mathematically flawed. Reliance on those metrics can result in a miscalculation regarding the true credit quality of a loan pool as well as obscuring meaningful trends and leading a well-intentioned analyst to the wrong conclusions.

About VantageScore Solutions

Credit scores can impact many aspects of your life, everything from whether you are able to get a loan and how much interest you will have to pay to whether you are able to rent an apartment.

VantageScore Solutions, LLC (www.VantageScore.com) is the independently managed company that owns the intellectual property rights to the VantageScore credit scoring models and is the leader in scoring innovation. Recently introduced VantageScore models score 30-35 million consumers* who typically are not scored by conventional models - without sacrificing predictiveness.

VantageScore credit scores are used by lenders, landlords, utility companies, telecom companies, and many others to determine creditworthiness. In fact, a recent study found that more than 8.5 billion VantageScore credit scores were used in June 2016-July 2017 by over 2,700 unique users. Of those, over 6 billion scores were used by more than 2,200 lenders of all sizes in their lending processes and over one billion VantageScore credit scores were provided directly to consumers through dozens of websites and lenders who provide their users and customers with their credit scores for free. By using the VantageScore model, these enterprises have access to many more consumers, and in turn, consumers have greater access to mainstream credit.

While there are many credit scoring models in the industry, the “win-win” for VantageScore is its innovative, highly predictive, patent-protected, tri-bureau scoring methodology that provides lenders and consumers with more consistent credit scores across all three national credit reporting companies.

* Reduction in public records and collection trade lines in consumers’ files will cause the number of consumers who would be newly scoreable using the VantageScore credit scoring model to decline.

Contacts

VantageScore Solutions, LLC
Jeff Richardson, 203-363-2170
Vice President and Group Head – Marketing & Communications
jeffrichardson@vantagescore.com

Contacts

VantageScore Solutions, LLC
Jeff Richardson, 203-363-2170
Vice President and Group Head – Marketing & Communications
jeffrichardson@vantagescore.com