Market Overview

DefaultRiskIndex.com Data Shows Mortgage Credit Loosening: Mortgage Risk Consumption and Originations Both Increased Over Same Quarter, Last Year

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VantageScore
Solutions, LLC
, developer of the VantageScore® credit scoring
models, today announced the 2018 first quarter update to its Default
Risk Index
(DRI) data series. The latest update reveals that the
default risk index (DRI) – a comparison of the total volume and
weighted-average risk profile of quarterly originations – specifically
in the mortgage category, increased over last year; also marking the
highest DRI for this category since Q2 2015.

Changes to specific index values are summarized in the following table:

                                                         
CATEGORY      

TOTAL
ORIGINATIONS

     

TOTAL
ORIGINATIONS
VS. LAST
QUARTER

     

TOTAL
ORIGINATIONS
VS. SAME
QUARTER LAST
YEAR

     

PROBABILITY
OF DEFAULT
(WEIGHTED)

     

DEFAULT
RISK
INDEX

     

DRI VS.
LAST
QUARTER

     

DRI VS.
SAME
QUARTER
LAST YEAR

Auto       153,320,357,065       .57%       3.09%       4.26%       96.6       13.53%       -2.95%
Bankcard       85,187,666,606       -2.78%       -6.08%       2.78%       99.0       3.33%       1.81%
Mortgage       329,167,185,062       -18.15%       2.03%       1.17%       100.9       4.42%       5.63%
Student       23,792,437,256       -3.27%       -6.55%       18.15%       87.8       .28%       -6.28%
                                         

INDEX

A quarterly comparison shows a slight increase in risk consumption in
the bankcard and mortgage, while the student loan category remained flat
and the auto loan category materially increased risk. On a quarterly
basis, the auto industry's DRI had the largest increase (13.53%); while
in the previous three quarters the industry's DRI has stayed relatively
stagnant.

SNAPSHOT

Year-over-year, an increase in both mortgage origination volumes (2.03%)
and the mortgage DRI (5.63%) indicate an increased appetite for risk.

ORIGINATIONS

There was a slight increase in originations in the mortgage and auto
categories year-over-year (2.03% and 3.09%, respectively). As is typical
seasonally, both bankcard and student loan originations slightly
declined at the turn of the year.

Each risk profile is indexed to the beginning of the series, where
the third quarter of 2013 equals 100. DRI profiles that are close to 100
show an equivalent risk activity to the 2013 benchmark; whereas DRI
profiles that fall further from 100 distinguish risk activity that is
either higher or lower than the benchmark (depending on the results
).

About the Default Risk Index

The VantageScore Default Risk Index (DRI) and its website,
DefaultRiskIndex.com, permit users to monitor the shifting quarterly
risk profiles of loan originations in the mortgage, credit card, auto,
and student loan categories. The DRI is derived using credit file data
from TransUnion and VantageScore odds charts— tables furnished to
VantageScore users that match values on the 300-850 VantageScore scale
range with their corresponding probability of default (PD) values.

The Default Risk Index is a measure of relative changes in risk level,
benchmarked against the third quarter of 2013, the first period for
which data were compiled. Interactive tools at DefaultRiskIndex.com
allow users to view trends for each loan category and freely download
the data behind the charts.

The VantageScore Default Risk Index is provided as a free resource to
institutional and individual investors, professionals in the
securitization field, academics, and all others interested in systemic
lending risk. It is updated quarterly, with data reflecting loans issued
in the preceding quarter.

VantageScore Solutions and TransUnion developed the DRI to highlight
limitations in the traditional ways credit scores are used to evaluate
risk for categories or pools of loans. Today's common practices—using
"weighted average" or "distribution by score band" to summarize risk—
are mathematically flawed. Reliance on those metrics can result in a
miscalculation regarding the true credit quality of a loan pool as well
as obscuring meaningful trends and leading a well-intentioned analyst to
the wrong conclusions.

About VantageScore Solutions

Credit scores can impact many aspects of your life, everything from
whether you are able to get a loan and how much interest you will have
to pay to whether you are able to rent an apartment. At VantageScore, we
understand the impact credit scores have and we take it seriously.

VantageScore Solutions, LLC (www.VantageScore.com)
is the independently managed company that owns the intellectual property
rights to the VantageScore credit scoring models and is the leader in
scoring innovation. The recently introduced VantageScore 4.0 model
scores approximately 30 million consumers who typically are not scored
by conventional models – without sacrificing predictiveness.

VantageScore credit scores are used by lenders, landlords, utility
companies, telecom companies, and many others to determine
creditworthiness. In fact, a recent study found that more than 8.5
billion VantageScore credit scores were used in June 2016-July 2017 by
over 2,700 unique users. Of those, over 6 billion scores were used by
more than 2,200 lenders of all sizes in their lending processes and over
one billion VantageScore credit scores were provided directly to
consumers through dozens of websites and lenders who provide their users
and customers with their credit scores for free. By using the
VantageScore model, these enterprises have access to many more
consumers, and in turn, consumers have greater access to mainstream
credit.

While there are many credit scoring models in the industry, the
"win-win" for VantageScore is its innovative, highly predictive,
patent-protected, tri-bureau scoring methodology that provides lenders
and consumers with more consistent credit scores across all three
national credit reporting companies.

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