Grounded in peer-reviewed research, with measurable impact on risk-adjusted portfolio returns. Embedded in Fitch Ratings' methodology for over 20 years.
Request a BriefingMortgage default is driven by local economic conditions: employment shocks, housing supply, price cycles, migration flows. These variables diverge sharply across markets and move independently of national trends. Historical location data captures where risk has been, but it tells you nothing about where it's going.
The result is systematic mispricing of local risks — and a gap in portfolio performance that shows up when regional conditions turn.
ForeScore is a predictive location risk score that complements a borrower's credit score in predicting default and prepayment risk at the ZIP code level over the full 30-year life of a mortgage loan.
The score is standardized around a baseline of 100. A ForeScore of 80 in a given ZIP indicates 20% lower risk than baseline; a score of 130 indicates 30% higher risk. Integration is straightforward: adjust your existing default or prepayment estimates by the same proportion as the ForeScore's deviation from par, and your model immediately reflects the future location risks your portfolios actually face.
In UFA's analysis of mortgage loan performance, borrowers within the same credit score quintile carried up to five times greater default risk depending on where they lived. For risk managers, that distinction is the difference between accurate reserves and systematically mispriced exposure.
In the 1990s, two finance professors founded UFA on a then-contrarian idea: that geography is as important as borrower credit in determining how a mortgage performs. ForeScore is three decades of research on that idea, made actionable.
Dennis R. Capozza, Ph.D. — Professor Emeritus of Finance, University of Michigan Ross School of Business – leads UFA's research and has published more than 100 peer-reviewed articles on mortgage risk, urban economics, and real estate finance. His consulting work spans Fannie Mae, Freddie Mac, Citicorp, and GE Capital. He is joined by Lawrence M. Benveniste, Ph.D. and Ryan D. Israelsen, Ph.D., both active academics with deep institutional consulting experience.
