Which of the following is NOT a consideration by underwriters when assessing default risk? Letter of recommendation Credit history Borrower income Estimated housing expense
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Traditional underwriting to determine the risks associated with lending include credit scores, income, and employment history. The online lender ZestFinance used data analysis to find that people who fill out loan applications using all capital letters default more often than those who use all lower case letters. In addition, people who fill out the application using upper and lowercase letters accurately default at the lowest rate. Explain how to obtain and analyze data to determine whether the method used to fill out loan applications results in different default rates.
Inference on Categorical Data
Tests for Independence and the Homogeneity of Proportions
A new applicant, age 32, is applying for a loan. Using the table below, what is the estimated probability the loan will default using k = 3. Record Age Marital Loan Risk Default 1 34 Single $ 5,000.00 High No 2 24 Married $ 15,000.00 Low No 3 31 Single $ 7,000.00 Medium Yes 4 32 Other $ 10,000.00 Medium No 5 44 Married $ 12,000.00 High Yes 6 53 Single $ 9,000.00 Low No 33% 100% 0% 66%
Rashmi S.
Borrower info: Income (annual) $240,000.00 Income (monthly) $20,000.00 Monthly debt (average) $2,000.00 Monthly Taxes + Insurance $700.00 Down Payment $50,000.00 Loan terms: Annual Interest Rate 4.00% Periodic Interest Rate 0.33% maximum FE monthly DTI 28.00% maximum BE monthly DTI 36.00% maximum LTV 95.00% maximum loan/DP 19.00 Mortgage Closing Costs $5,000.00 Mortgage Buydown Points 1.75% Term (years) 30 Payments per year 12 Total Number of Payments 360 Balloon 0 Green text represent inputs Purple text represent outputs Maximum PMT given FE DTI limit Maximum PMT given BE DTI limit Maximum PMT given both FE & BE DTI limits Maximum loan given FE & BE DTI limits Maximum loan given LTV limit and down-payment Maximum loan given income & collateral tests Maximum payment given income & collateral tests How much house can Ann afford? Total Mortgage Costs
Akash M.
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