Washington -- Call it paternalistic. Call it intrusive. Or call it a smart business practice that should ultimately expand the number of Americans who can hold on to their homes, even when their credit gets stretched.
Whatever you call it, it's fast heading for reality in the home loan arena: Mortgage companies are turning to sophisticated mathematical scoring techniques that "tag" you once you've gone to closing and start making your monthly payments.
Depending on your score -- which you're never likely to see -- you can expect to get markedly different treatment when and if you fall behind on your payments. If you carry a low score and your check hasn't arrived 10 days after the due date, wham! You're going to hear from the mortgage servicer immediately by phone at home or the office. You're likely to get an ominous letter notifying you that your delinquency could lead to foreclosure. And, behind the scenes, your lender will have ordered a fresh credit report to see whether you've fallen behind on car payments, department store charge accounts or anything else in your credit universe.
Carry a high score, by contrast, and your treatment is likely to be far gentler as a 10-day delinquent. Your mortgage company might delay communicating with you for up to a couple of weeks, based on the statistical odds from your score that you're likely to send in your payment -- plus late fee -- shortly. You may never hear the threatening word foreclosure, nor have your credit file scrutinized behind your back.
What's going on here? Mortgage industry experts say the move to default-risk scoring of borrowers now under way is the logical extension of the credit-scoring already extensively in use at the front end of the mortgage process -- the application and %J underwriting stage. Virtually every major mortgage lender uses some form of electronic credit scoring to evaluate prospective borrowers. The scores are based on public and private data available about you, primarily on file with the three major credit repositories -- TRW, Equifax and TransUnion.
Most lenders set a floor -- say a score of 600 on a scale of 800 or 1,000 -- below which they simply won't lend money. Pass the scoring test and you get a mortgage. Fail it and you get rejected.
Now lenders are applying the same concept to dealings with homeowners and buyers after they've extended a mortgage. The key difference here is that the goal isn't to deny you money -- after all, you've already got the loan -- but to deal with you effectively if you happen to run into financial rough water.
"What [default-risk] scoring enables you to do," says Martin Wahl, director of product development for Atlanta-based Equifax Mortgage Information Services, "is to gauge how best to work with different borrowers and correct the underlying problem before it gets out of hand. It tells you who should get what form of attention, when."
Kenneth R. Harney is a syndicated columnist. Send letters care of the Washington Post Writers Group, 1150 15th St. N.W., Washington, D.C. 20071.