Transunion uses algorithm to improve collateral valuations

Transunion has developed a proprietary algorithm that addresses a growing interest in accurately capturing shifting property valuations in the mortgage industry.

"Fluctuations can dramatically impact the value of a property, putting both mortgage and home equity borrowers and lenders at risk," Satyan Merchant, a senior vice president at Transunion, in a press release.

The algorithm that Transunion developed links credit tradeline information — accounts listed on a consumer's credit report — with lien data in ways that make property valuations more exact, according to the bureau. 

It's using the algorithm as the basis for a new lending and servicing portfolio risk-management tool that captures information about up to five pieces of real estate owned by a consumer, going beyond the subject property serving as collateral for a particular lender's mortgage or home equity loan.

"Having access to current property value insights for portfolio management can help lenders," said Merchant, who leads Transunion's auto and mortgage business.

The announcement about the new risk management resource is timely as it follows close on the heels of a new Federal Housing Finance Agency study that identified appraisal lags in measuring collateral value during the pandemic-era runup in home prices as an issue. That research found that homes came in underappraised as much as 15% of the time during that period.

Tappable U.S. home equity, or the total amount of single-family collateral value that's practical for the industry to finance, totaled $19.7 billion and was up 1% year-over-year at the end of the third quarter of 2023, according to Transunion's most recent numbers.