Seeking to help mortgage lenders improve quality and mitigate loss in mortgage originations, Equifax has announces the availability of its white paper, Zooming In on Undisclosed Debt. Supported by proprietary data and research from Equifax, the white paper explores the risk and implications of undisclosed borrower debt in mortgage lending.
The vast majority of mortgage borrowers are forthcoming about their debts during the initial mortgage application; however, the problem occurs during the "quiet period" between the original credit file pull and the loan closing. Almost one-fifth of all mortgage borrowers, including those with solid credit scores and debt-to income (DTI) ratios, apply for at least one new trade line during this period. Many borrowers simply don't realize how this new "undisclosed debt" impacts their ability to qualify for their mortgage.
Supported by proprietary data and analysis from Equifax, this whitepaper explores the widespread industry problem of undisclosed debt by borrowers, identifies why lenders need to address the problem of undisclosed debt and describes possible solutions, such as implementing a dynamic monitoring platform that identifies undisclosed debts and liabilities continuously.
"Most borrowers are honest, but whether undisclosed debt during the quiet period is intentional or not, it poses a threat to lenders, regardless of their underwriting process," said Craig Crabtree, senior vice president and general manager of Equifax Mortgage Services. "With early warning, lenders can proactively discuss the impact of new debt with the borrower, obtain additional documentation needed for the secondary market, or change the terms of the loan. Lenders who are able to continuously monitor credit activity during the quiet period can significantly reduce their buy-back risk and provide much better service to borrowers. This will be especially critical now that the market is shifting from refinance to purchase money."