April, 2012

TheMReport — News and strategies for the evolving mortgage marketplace.

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FEATURE ORIGINATION Alternative Data May Hold the Key The Lending Lockdown: MReport speaks to Mark Luber, VP of analytics and data acquisitions for LexisNexis, about the new data that's giving lenders enhanced solutions for evaluating credit and risk. M // What statistics can be defined as alternative data? LUBER // Traditional categories of data such as a consumer's ability and willingness to repay a loan still play a part in establish- ing the framework for alternative data, but analytics categorized as alternative data include more specific, less tangible elements that impact a borrower's credit standing. One of the biggest shifts we've seen among big banks during the recent past is the desire for information that goes well beyond a simple credit score or evaluation. For ex- ample, examining the complete, historical picture of a borrower's housing decisions—how many times they've moved and how recently—provides a much clearer vision of the consumer's stabil- ity or instability, since borrow- ers who move infrequently are proven to be about 50 percent less risky. M // What are the chief challenges facing your clients today? LUBER // One of the primary challenges is, of course, growing their businesses as they emerge from the recession. All the financial institutions are trying to grow, but given the past, they don't want to expand by extend- ing their lending policies without key information to make the right decisions. Overall, our lend- ers are focused on making better offers to those who deserve it and extending appropriate offers to riskier borrowers. Additionally, larger institutions are working to better understand the debt they're holding from a credit perspective, and they're trying to identify what kinds of fraud exist in their current port- folios, so they can manage those accounts differently. Companies specific to the mortgage industry are particularly interesting, and though they've typically lagged behind in data-related initiatives as compared to other financial services, the high value of their products and the additional regulations have created a special challenge for mortgage lenders, especially in terms of non-per- forming mortgages. M // How are financial institutions applying and utilizing alternative data? LUBER // Generally speaking, lenders have been capitalizing on alternative data to open up new consumer segments and make THE M REPORT | 43 ORIGINATION SERVICING ANALYTICS SECONDARY MARKET

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