Suppose you are a loan officer at Carbondale Local Bank.

Joan Doe listed the following information on her mortgage application: (LG 21-2, LG 21-3)

Characteristic Value Annual gross income $45,000 TDS 10%

Relations with FI Checking account Major credit cards 5 Age 27 Residence Own/Mortgage Length of residence 2½ years Job stability 5½ years Credit history Missed 2 payments 1 year ago Use the information below to determine whether or not Joan Doe should be approved for a mortgage from your bank.

Characteristic Characteristic Values and Weights Annual gross income

<$10,000

$10,000–

$25,000

$25,000–

$50,000

$50,000–

$100,000

>$100,000 Score 0 10 20 35 60 TDS >50% 35%–50% 15%–35% 5%–15% <5%

Score −10 0 20 40 60 Relations with FI None Checking account Savings account Both Score 0 10 10 20 Major credit cards None Between 1 and 4 5

or more Score 0 20 10 Age <25 25–60 >60 Score 5 25 35 Residence Rent Own with mortgage Own outright Score 5 20 50 Characteristic Characteristic Values and Weights Length of residence

<1 year 1–5 years

>5 years Score 0 25 40 Job stability <1 year 1–5 years >5 years Score 0 25 50 Credit history No record Missed a payment in last 5 years Met all payments Score 0 −15 40 The loan is automatically rejected if the applicant’s total score is less than or equal to 120. The loan is automatically approved if the total score is greater than or equal to 190. A score between 120 and 190 (noninclusive) is reviewed by a loan committee for a final decision.

AppendixLO1