Making Financially Inclusive Decisions In Mortgage Lending

Credit reports and traditional credit scores are a mainstay of consumer lending, but Fair Credit Reporting Act (FCRA)-compliant information that is not included in traditional credit report data, such as income and employment data, has the potential to help responsibly expand consumer access to credit opportunities and support a more inclusive economy. In addition, leveraging this type of alternative data can help mortgage lenders make loans available to more worthy homebuyers.

When potential responsible borrowers are shut out of the mortgage process because of a low credit score, it’s a lose-lose-lose scenario for those borrowers, their potential lenders, and the economy. Building a more inclusive set of financial practices helps bring more consumers into the financial mainstream. Their full participation in the economy and better access to credit can mean more consumer spending, spurring economic growth.

Mortgage lenders can play a key role in removing barriers to financial inclusion.

It starts with greater visibility with data such as income and employment data. This data helps lenders:

• Bring thin-file consumers into the financial mainstream to fully participate in the economy, such as by helping members of marginalized communities achieve homeownership.
• Transform how they assess borrower credit and risk, thereby helping to create fairer, more inclusive lending systems.
• Better accommodate thin and no-file consumers’ unique needs, provide better customer service during loan servicing and possibly even grow their business by opening the door to say “yes” to more borrowers.

Brandi Hamilton had the opportunity to dive into the importance of alternative loan decisioning data, creating greater visibility for borrowers, mortgage lenders not missing out on servicing a viable borrower and how FIs can make financially inclusive decisions in the latest Progress In Lending.