Opportunity: New Credit Scores Could Impact Mortgage Banks
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Mortgage Banking Quarterly Update


Industry Update

Opportunity: New Credit Scores Could Impact Mortgage Banks
A new model for calculating influential consumer credit scores could improve a borrower's ability to receive a loan with good terms or increase the amount of credit available to them. Fair Isaac, the company that creates FICO scores, recently announced that it is changing the way it calculates the scores. These scores are widely used by the mortgage banking industry when making lending decisions, according to The New York Times. The updated scores, which will be available in fall 2014, will likely help consumers with unpaid medical bills or those with old collections actions. Demand from lenders and concerns by the Consumer Financial Protection Bureau prompted the changes. The new model also uses a new technique to analyze creditworthiness if the consumer has a limited credit history.

Industry Impact
Mortgage banks could realize more business by using new FICO scores to determine a consumer's creditworthiness. The new calculation method should result in higher credit scores and greater loan production.

Industry Indicators

The bank prime loan rate, an indicator of mortgage banks' revenue from lending, remained at 3.25 percent as of the week of August 15, 2014, unchanged from the same week in 2013.
 
The value of U.S. residential construction spending, which impacts demand for mortgage banking services, rose 9.8 percent year-to-date in June 2014 compared to the same period in 2013.
 
Total U.S. revenue for credit intermediation and related activities rose 1.3 percent in the first quarter of 2014 compared to the previous year.

Fast Facts

Companies in this industry lend money with real estate as collateral.
 
Major companies include units of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo (all based in the U.S.), as well as units of Barclays Bank (UK), BNP Paribas (France), Deutsche Bank (Germany), and Nationwide Building Society (UK).
 
Mortgage banks lend money to homeowners through a mortgage, with the home as collateral; some specialize in lending to farms or businesses, also with real estate as collateral.
 
Typical customers are home buyers.
 
Revenue from new home mortgages is highest in summer, when more homes are sold.
 
Mortgage Banking
SIC Codes: 6162
NAICS Codes: 522292
Copyright © 2015 Skoda Minotti, All rights reserved.


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