Impact of Mortgage Soft Information in Loan Pricing on Default Prediction using Machine Learning

We analyse the impact of soft information on US mortgages for default prediction and provide a new measure for lender soft information that is based on the interest rates offered to borrowers and incremental to public hard information. Hard and soft information provide for a variation in annual default probabilities of approximately 3%. Soft information has a lesser impact over time and time since origination. Lenders rely more on soft information for high risk borrowers. Our study evidences the importance of soft information collected at loan origination