Scorecards are not there just to annoy
Posted on August 23rd 2010
Some would have you believe that lenders who use scorecards are somehow making life difficult for mortgage brokers by inferring that scorecards decline good borrowers that would have otherwise been accepted. Whilst this may be a convenient marketing story it is not the case. I have worked for lenders that use scorecards and ones that did not use scorecards and my view is that they both have their pros and cons.
A properly functioning mortgage market should offer brokers and borrowers the choice. Scorecards are designed to underwrite cases be it mortgages, credit cards or insurance policies. They use empirical data built on the behaviours of thousands of borrowers and they assess the willingness of a borrower to repay their debts. A good quality mortgage borrower is just as likely to be accepted by a scorecard as it is by an underwriter.
In fact a scorecard does exactly the same job as an underwriter, just in a different way.
One reason why brokers would welcome scorecards is that you get consistency of decision, scorecards don’t have bad days, they do not get distracted, they do not change jobs or companies – they just do their job.
On the flip side an underwriter can take a view on a case if it is below the credit quality the lender would normally accept. Complexity of income has nothing to do with scorecards as this is based on the lender’s lending policy; this is a myth and I will attempt to explain next week how lending policy and scorecards interact.
