Comment:

Anew concept has impacted and simplified the task of themulti-housing rental agent: the use of a numerical score (typicallybased on credit information) to screen housing applicants. It's notan entirely new idea--mortgagers, insurers and other real estatepeople have been using Fair, Isaac & Co.'s credit scores(called FICO scores) for a number of years. But scoring models haverecently become the vogue among rental agents because a numericalscore is thought to be better than the agent's intuition inselecting tenants. It's also less likely to get the Fair Housingagency riled up about the possibility of a biasedselection.

Nowthere's an even better mousetrap, claims First American RegistryInc., the Rockville, MD-based provider of RegistryScorex, ascreening tool for the multifamily industry. Why do they claim thatScorex is a better tool? It's the only scoring model that provideslandlord/tenant court records on a nationwide scale, says thefirm's Larry Feld.

Thatis the crucial difference between Scorex and other scoring models,Feld says, because studies have shown that the most importantindicator of whether or not an applicant is going to pay rent ontime is if they have paid rent on time in the past. "Andlandlord/tenant court records are the single strongest predictorsbecause they reveal whether the applicant has failed to pay rent inthe past, been evicted or accused of damaging rental property," henotes.

First American now contains in its database the court recordson some 33 million potential applicants, and the number is growingdaily as the company's personnel inundate civil courts in everymajor city each week to gather records of delinquenttenants.

Thecompany was started nearly 20 years ago by a young student namedSteve Rabbit, who was doing research in a local court for a paperat the University of Maryland. He happened to noticelandlord/tenant court filings--the Failure to Pay Rents andUnlawful Detainers--and because the information was in the publicdomain, he brought it to his building owner and asked, "Would thisbe of value to you in judging whether you were going to lease to aprospective resident?" Her response was an enthusiasticyes.

Based on that, he started supplying court records to housingowners and managers in the Washington, DC area. Two decades later,the business has evolved and grown; become computerized; integratedits court records with credit-bureau reports and the applicants'data; and most recently introduced Scorex, its numerical scorefeature that helps identify high-risk applicants.

Whenon-line technologies kicked in some years ago, First Americanbecame the first resident-qualifying agency to offer access tocourt and credit information over the Internet, notes Feld, leadingto the speedy responses the company now boasts. In 1998, Registrybecame part of the First American Corp., a $2-billion companylisted on the New York Stock Exchange. Today, First AmericanRegistry boasts among its clients some of the largest multifamilycompanies in the country, including Aimco, Equity PropertyManagement, Pinnacle and Southern Management.

Wouldn't eviction information come out eventually in the creditreports that most rental agents today routinely request, we asked."No," states Feld. "There is a time lapse of some 90 to 100 daysbetween when an owner files Failure to Pay Rent or UnlawfulDetainment papers in court and when the credit bureau receivesnotice of any action. And in those 90 to 100 days, that high-riskapplicant may be busy looking for a new apartment."

Orperhaps, in those 90 to 100 days, the applicant may have settledwith the owner or a collection agency, in which case, the creditbureau will never hear about his court records. "Sometimes a dealis worked out between the tenant and the collection agency,"explains Feld. "The collection agency will accept 75 cents on thedollar and split it with the management company. Then the wholelegal process dies and nothing gets reported anywhere. Only fiveout of 100 court filings ever make it to a credit bureaureport."

What's more, "many high-risk tenants know how this systemworks," Feld points out. "They know that anyone who uses a creditbureau report exclusively to determine whether or not they're goingto house this person is going to get this information late--if atall."

ButFirst American's personnel will have already picked up the filingrecord from civil court, and it is stored in the company's databasewhether there has been any resolution or not. With officesnationwide, First American Registry covers court filings in 80% ofall major US population areas, an important advantage in this ageof swift relocations, says Feld. "If someone from New York appliesfor residency in Las Vegas, it's important for the rental agent toknow their record in the area where they used toreside."

In1986, Experian, one of the country's three major credit bureaus,decided to partner with First American. Together, Experian andFirst American designed RegistryScorex, which offers a number ofindividual or combined reports to clients.

"Wegenerally recommend that renting agents get a credit report and aregistry check report, which is our core product and includes thelandlord/tenant courts records," says Feld. "These twocomponents--the credit report and the national registrycheck--comprise Scorex. The criminal check is a separateitem."

Thisis how the scoring model works: The rental agent logs in, using apersonal ID, password and property ID. The agent inputs theapplicant's name, social security number, current address,employment information (including salary) and the cost of therental unit applied for--into a standard onscreen form. The type ofsearch is selected (registry check, Scorex, credit report and workcheck), and then with a click, the information is submitted to theFirst American database.

Using a hypothetical company, this reporter timed how long ittook before a response popped up on-screen, and indeed, in no morethan one minute, a report appeared. It gave all previous addresses,verified work information and credit information and gave ourapplicant a score of 206 out of 300. This score put our applicantwell into the acceptable range.

Thedecision-making scale can be adjusted according to the state of theeconomy, points out Feld. "Supposing the occupancy rate suddenlydrops," says the First American executive. "A property manager orcompany decision-maker can lower the decision point to make moreapplicants acceptable. They would be accepting more risk, butminimally. Conversely, if their housing community is back up to 98%occupancy, the manager can raise the bar."

Thisreporter found the Scorex system to be user-friendly and efficient.It requires no prior training. The rapid pop-up of significantinformation appeared to be an advantage in making a swift decisionwhile the applicant was still in the rental office. The numericalscore provided a comfort level for decision-making, and theknowledge that the extensive records of landlord/tenant courtfilings would help rout out troublemakers was a most reassuringelement.

Readers can contact the writer at [email protected]

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