Negative liquidity, or owing more on your home than its value, has become a much too common theme in the past few years. According to CoreLogic, 11 million consumers are underwater, representing 1 out of 4 homeowners in the nation. The irony is with mortgage rates remaining at historic lows, consumers who can benefit the most from refinancing can’t qualify due to their negative liquidity situation.
Mortgage Banker’s Association recently reported that approximately 74% of home loan volumes were mortgage re-finances in 2Q 2012. Consumers who have been able to refinance to take advantage of the low interest rates already have, some even several times over. But there is a segment of underwater consumers who are paying more than their scheduled amount in order to qualify for refinancing – which translates to growth opportunity in mortgage loan volume.
Based on an Experian analysis of actual payment amount on mortgages, actual payment amount was reported on about 65% of open mortgages (actual payment amount is the amount the consumer paid the prior month). And when the actual payment is reported, the study found that 82% of the consumers pay within their $100 of scheduled payment and 18% pay more than their scheduled amount.
Actual payment amount information as reported on the credit file, used in combination with other analytics, can be a powerful tool to identify viable candidates for a mortgage refinance, versus those who may benefit from a loan modification offer. Consumers methodically paying more than the scheduled payment amount may indicate that the consumer is trying to qualify for refinancing. Conversely, if the consumer is not able to pay the scheduled payment about, that consumer may be an ideal candidate for a loan modification program. Either way, actual payment amount can provide insight that can create a favorable situation for both the consumer and the lender, mitigating additional and unnecessary risk while providing growth opportunity.
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