The VantageScore Model’s Consideration of Natural Disasters
One of the most disturbing misrepresentations made by those who opposed the real estate bailout was that homeowners who couldn’t meet their mortgage obligations deserved to be foreclosed on. The opponents argued that troubled homeowners were underwater because they took on mortgages they could never afford and therefore they shouldn’t have been allowed to keep houses that were never within their means in the first place.
As anyone who visits an HPF call center will quickly learn, homeowners far too often fall behind on their mortgage payments because of circumstances beyond their control. Job loss is the most frequent, but an illness incurring severe medical costs also is quite common. Sadly, we have counseled many homeowners who were beset with both a job loss and a family illness. Another circumstance that can adversely affect a homeowner’s economic circumstance is a natural disaster, such as Hurricanes Katrina and Sandy.
So, it is with great enthusiasm that HPF heartily endorses a provision in the recently released VantageScore 3.0 model by VantageScore Solutions, which is the independently managed credit scoring company whose members are the three national credit bureaus. The VantageScore model is steadily gaining popularity within the banking industry and VantageScore 3.0 features a special provision for victims of natural disasters. When a lender reports that a customer or member has been impacted by a natural disaster, delinquencies are temporarily excluded while, unlike other models, positive payment data is retained. The move is both progressive and sound because natural disasters are typically rare occurrences so homeowners shouldn’t be unfairly penalized for being victimized by one.
Full Disclosure: The CEO of VantageScore is Barrett Burns, a member of HPF’s board. Mr. Burns is a veteran banker, who previously held executive lending positions at Citicorp and other major financial institutions. Mr. Burns adds to the already rich diversity of perspectives and experiences on the HPF board. That diversity ensures our mission of developing effective and realistic solutions to promote sustainable homeownership. As the VantageScore 3.0 model demonstrates, the interests of consumers are not always at odds with the banking industry.