Fiserv Goal: Find At-Risk Mortgages Before Default

Fiserv Inc. developed its newest suite of services on the theory that lenders might be able to stem mortgage defaults if they can identify troubled borrowers before they fall behind on their payments.

The Fiserv Prism and Home Retention Solutions suite is aimed at parsing financial databases to determine which borrowers are making payments but may run into trouble.

"The foreclosure problem is going to get worse. It's not going to get better anytime soon," James L. Smith, the executive vice president of portfolio services at Fiserv Lending Solutions, said in an interview. He said he expects a "tidal wave" of foreclosures next year, because more adjustable-rate mortgages will reset this year.

Lenders are making a bad situation worse by pursuing foreclosure instead of restructuring troubled loans, Mr. Smith said.

The Brookfield, Wis., vendor's Prism tool set is meant to predict the likelihood that a borrower will fall behind on payments. (Prism stands for "Predictive Risk Index Score Modeling.")
For example, he said, the software can track consumers' credit ratings to measure "FICO drift," where a credit score is falling but the borrower remains current on the mortgage.
The software also looks at Fiserv's Case Shiller Home Price Index, which monitors market conditions to show where home prices may be falling, as a risk factor for borrowers. Even customers with good credit might be at risk of default if property values in their region fall so much that their houses are now worth less than they owe, Mr. Smith said. "It's not a mortgage type that makes them delinquent. It's an equity issue."

Other factors that play a role in Prism's analysis include property type and price, geographic area (in some cases at the ZIP code level), and various forms of risk scoring.

The suite lets Fiserv default management experts offer the lender alternatives to foreclosure, such as a loan restructuring, which can be customized according to the loan type and the borrower's state.

Also, Fiserv's call center can reach out to borrowers to discuss the terms of their loans, Mr. Smith said. "Everyone we had doing [back-office] origination work has been retasked to do this work."

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