What is a blind mortgage?

The high-risk blind spot in the origination process is known as the “quiet period.” It is the waiting period between the start of origination and closing when consumers can incur undisclosed debt or new trade lines that increases their debt-to-income (DTI) ratio. As a result, this can jeopardize closing. Here we will share why undisclosed debt is a big industry issue. We will then offer best practices for addressing undisclosed debt within a tech-forward, digital origination strategy.

When it comes to undisclosed debt, three percent is an important number. A mere three percent jump in a borrower’s DTI ratio can spark costly loan repurchase demands. The three percent jump will negatively impact a lender's Government-Sponsored Enterprise (GSE) scorecard. It can trigger regulatory action due to non-compliance with ability-to-pay guidelines. Agencies are hyper-aware of the risk potential. This is why undisclosed liabilities are listed as one of the big six areas that lenders must thoroughly check prior to closing.

According to the data, the risk is real. A recent Equifax analysis of 98 million+ mortgage originations between 2010 and 2018 reveals that 4.5% of those borrowers applied for an auto loan during the same month as their mortgage origination. In a separate review of undisclosed debt during mortgage origination, we found that 36% of borrowers who only opened one new trade line during the quiet period increased their DTI ratio by at least three percent.

Apart from skewed DTI ratios, undisclosed debt can point to an increased risk in fraud. Misrepresented liabilities are causing 23% of loans with mortgage fraud findings, according to Fannie Mae. It also presents operational issues. Undisclosed debt can disrupt mortgage closings, overload underwriting resources, and ruin the customer experience. This will result in delaying or blocking their path to homeownership. Undisclosed debt is an industry issue. It can negatively impact loan pipelines and ultimately a lenders' bottom line.

Today, given the fast-growing shift to digital strategies, lenders have a unique opportunity to reduce risk that comes from undisclosed debt. Automated undisclosed debt monitoring (UDM) tools are available to continuously monitor all loan files in a lender’s pipeline for new tradelines and other changes to a borrower’s credit. UDM triggers daily alerts anytime relevant, new activity is discovered. This gives lenders daily visibility into a borrower’s credit changes. Activity monitored includes new tradelines, new inquiries, balance changes, new late payments, public record bankruptcy and more—from origination through closing. The net-net? No more last-minute surprises right before closing. Instead, lenders can proactively work with borrowers to resolve most issues. This will keep their closings on time and on track.

With UDM alerts, lenders can intelligently prioritize using three categories:

As mortgage banks rapidly adopt digital processes to achieve better efficiency, cost savings and customer experiences do not forget about the “quiet period.” Instead of getting blindsided at closing, integrate undisclosed debt monitoring technology, for clear visibility into borrower credit files. Daily alerts can help lenders streamline required underwriting tasks and optimize their resources. As an end result, lenders can confidently close more loans faster and with less risk.

Contact us today. Learn how Equifax Undisclosed Debt Monitoring can be used as a standalone digital service or integrated into your technology platform.

Blind loan modification is a relatively new term that has popped up in the area of bank lending. Blind loan modification is a way that banks make an alternate

Indian Banks' Association (IBA) procedural guidelines also state that blind and low LOAN FACILITY TO VISUALLY IMPAIRED PERSONS BY HFCS - 3rd

Mortgage Justice Is Blind. By John D. Geanakoplos and Susan P. Koniak. Oct.

Introduction: The blind and visually impaired are eligible to receive a mortgage from the Ministry of Construction and Building. The blind and

Home ownership is the American Dream, right? A quick internet search would certainly indicate it remains very important to many people. According to the Department of Housing and Urban Development:

For many Americans, owning a home is an essential part of the American dream that conveys a number of economic benefits. They include the ability to accumulate wealth and access credit by building home equity, reduce housing costs through the mortgage interest deduction, and gain long-term savings over the cost of renting.

If you want to dive deeper, here’s a scholarly article from the Journal of Economic Perspectives. Laurie Goodman and Christopher Mayer delve deeply into home ownership and trends in the US and other countries. Would it surprise you to know the US is well below average in a comparison of 18 developed countries? And we’re trending lower. Part of the explanation may be the rising cost of entering this market. That includes both the downpayment and the overall cost.

So what led me to focus on home ownership in this week’s post? The simple answer is that Andy Kearns, a content analyst for LendEDU, reached out to me with a helpful guide discussing home ownership. When it was founded in 2014, LendEDU had a goal of creating transparency in various markets. That includes student lending, unsecured lending, auto lending, banking, credit cards, and some miscellaneous insurance products.

Let me start with their closing Bottom Line:

“For people with disabilities, buying a home is very feasible. It could greatly improve your quality of life and independence. However, there are a number of financial risks involved in such a big investment. It might not be right for you. Consider all the benefits and downsides, and talk to other disabled people who own homes to make sure that you’re making the right decision.”

That’s a great summary of the entire article which was refreshingly unbiased in its presentation. I recommend a thorough reading of the guide if you are blind, visually impaired, or have other disabilities. While it includes some useful information for anyone considering home ownership, it focuses on the aspects which are most relevant for people with disabilities.

The following excerpt is taken straight from their guide. I like the unvarnished content which helps you think through a major financial decision.

One benefit of buying a home is that you can renovate your space to accommodate your particular needs. For example, if you need a special shower, lower counters, ramps, or wider doors, you can make those changes without having to depend on a landlord or public housing authority to do it.

This can be particularly important to those who live in areas where there aren’t a lot of accessible rental housing options, or to those who have unique accessibility needs. In some cases, having your own place is one of the only ways that you can live with more independence and comfort.

Other benefits include the ability to build wealth and equity through the asset of your home that you can someday use to access cash through a home equity line of credit or to sell and support your retirement.

Unfortunately, there are a lot of downsides. The first is that you are responsible for all the maintenance. If something breaks down, you’ll have to pay for it. If you have a yard, you will either have to take care of it yourself or pay someone to do so. Depending on your disability and income, it could be difficult for you to do this. These additional expenses could be especially difficult if you are on a limited income.

If you have several emergency expenses and not enough savings, you could struggle to pay your mortgage and lose your home. It could then become difficult for you to find another place to live at the last minute. You’ll likely then have bad credit and many landlords check your credit before renting to you.

Another downside is that making changes to your home to improve your accessibility could potentially decrease the resale value of your home. While you might luck out and find a buyer who needs similar accommodations, those who don’t need such accommodations might not want to pay as much if they are must renovate the home by, for example, raising the counters or changing the shower or bath.

Other topics include:

Thanks to Jeff Gitlen for developing this guide. Jeff is a graduate of the University of Delaware. He writes about a wide range of financial topics including student loans, credit cards, small business financing, and more.  A number of sites, including Bloomberg, CNBC, Forbes, Market Watch, and more have featured his work.

A silent second mortgage is a second mortgage placed on an asset (such as a home) for down payment funds that are not disclosed to the original lender on the