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Lenders who want to sell mortgages to Fannie Mae and Freddie Mac next year have until the fourth quarter to start using the new FICO Score 10T and VantageScore 4.0 scoring models, but they will also be allowed to submit two credit reports instead Three servings. Calculate credit score.
That’s the new timeline set out Thursday by federal regulators Fannie Mae and Freddie Mac, who want to phase out the classic FICO credit scoring model and simultaneously implement “double-consolidated” credit reporting as a way to streamline the process.
To accommodate the “unified transition,” the Federal Housing Finance Agency (FHFA) directed Fannie Mae and Freddie Mac to release historical VantageScore 4.0 data in early third quarter 2024, rather than first quarter 2025 as initially proposed.
Sandra Thompson
“Synchronizing dual-consolidated credit reporting with the implementation of new credit scoring model requirements will reduce complexity for market participants, a key goal of our transformation efforts,” FHFA Director Sandra L. Thompson said in a statement. The release of historical data on tens of millions of business loan acquisitions validates FHFA and businesses’ commitment to a robust, transparent implementation process.”
“Businesses” refers to Fannie Mae, Freddie Mac and the 11 federal home loan banks, which provide capital to community banks and other financial institutions.
The Federal Home Loan Bank of San Francisco announced on February 12 that it has begun accepting mortgages issued by lenders using VantageScore 4.0 credit scores as collateral.
CrossCountry Mortgage, Movement Mortgage and Primis Mortgage Company have adopted the FICO Score 10T to qualify borrowers seeking nonconforming mortgages that do not meet Fannie Mae and Freddie Mac’s underwriting requirements.
Both FICO Score 10T and VantageScore 4.0 are touted by their supporters as more accurate and inclusive than the versions of FICO Score now required by Fannie Mae and Freddie Mac, but some lenders object to the FHFA’s timeline for moving to the new scoring model.
VantageScore, a joint venture of three national credit reporting agencies (Equifax, Experian and TransUnion), has launched a public relations campaign aimed at persuading regulators to adhere to a fourth-quarter 2025 implementation timetable.
In a study released in October, VantageScore claimed that its new scoring model could help an additional 4.9 million borrowers qualify for mortgages, and that delays in implementation would impact “creditworthy people of color.”
Tony Hutchinson, senior vice president of industry and government relations at VantageScore, said in a statement Thursday that the adoption of VantageScore 4.0 is “significant in addressing the racial homeownership gap and improving the safety and soundness of the mortgage finance system.” Sex has had a significant positive impact.”
“We are pleased that FHFA has accelerated the release of historical VantageScore 4.0 data so that the industry can continue to accelerate implementation of VantageScore 4.0 scores,” said Hutchinson. “We remain committed to working proactively and transparently with all stakeholders to smoothly transition to A more inclusive and predictive score.”
TransUnion, one of VantageScore’s backers, has also questioned plans to have lenders use two credit reports instead of three, claiming some borrowers will end up paying higher interest rates or being denied mortgages altogether.
“Using just two credit scores often results in an incomplete and inaccurate picture of a potential borrower, especially if a consumer’s most favorable set of credit data is excluded,” TransUnion said in a report. analyze last fall.
Allison Shuster, director of U.S. government relations for TransUnion, told Inman in a statement: “The deeper we look into the ‘two-way merger’ proposal, the clearer it becomes that homebuyers will be hit. Especially homebuyers from disadvantaged communities.” “Our own research finds that 500,000 new mortgages would experience higher interest rates under double consolidation, while 2 million consumers who qualify today would lose out under double consolidation . The price is too high for the small savings of a credit report.”
The FHFA said Thursday that allowing lenders to obtain credit reports from only two of the three national consumer reporting agencies would “promote greater competition in the marketplace.”
The agency said requiring companies to release VantageScore 4.0 historical data this year instead of next will help lenders move to a new credit scoring model that uses dual consolidated reporting.
“At a recent public forum hosted by FHFA, stakeholders emphasized the importance of this historical data to enable them to analyze new models as well as two-way consolidated credit reporting and evaluate any changes they must make to their systems and models. ” FHFA stated.
“Stakeholders also shared their views on the efficiencies that would come from combining the dual-consolidated credit reporting option with the traditional FICO transition.”
A spokesman for the Mortgage Bankers Association said the organization “appreciates the FHFA’s continued collaboration with industry stakeholders and its willingness to make adjustments throughout the process.”
Inman has requested comment from Equifax and Experian.
Editor’s note: This article has been updated to include comments from VantageScore and TransUnion.
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