Federal regulators announced today that they are taking steps to spur competition and legislatively mandated modernization in credit scoring.
Freddie Mac has already tested $10 million in loan sales involving
"We are happy to announce that, effective immediately, Fannie Mae and Freddie Mac are accepting new, modern credit scores that give American homebuyers the credit they deserve for paying their rent," Pulte said during a press conference Wednesday.
A group of 21 large players that applied to deliver loans with Vantage 4.0 will be the primary focus in onboarding, but the ability to submit the new score will be open to the full market, Pulte said.
"Fannie and Freddie will also have new separate pricing guides for VantageScore loans," Pulte added.
Lenders like Pennymac and Rocket Mortgage are part of the group of 21 players that will be using VantageScore, according to Pulte.
"We appreciate the FHFA and HUD's commitment to modernizing the credit scoring landscape, a move that introduces much-needed competition into a critical segment of the mortgage process," said Isaac Boltansky, head of public policy at Pennymac, in a press statement. "We believe that fostering competition in this space is a positive development for the industry and, most importantly, for the consumers who stand to benefit from a more transparent and cost-effective mortgage experience."
Industry groups largely cheered the announcement, with the Community Home Lenders of America CEO Scott Olson calling for the GSEs to go even further and develop their own scores.
Meanwhile, Scott Turner, secretary of the Department of Housing and Urban Development, said that HUD will allow modernized credit measures for loans it insures, too.
Turner reassured attendees that offering more options for measuring credit by examining payment records outside of traditional credit would not compromise underwriting standards for loans that serve as a pathway to homeownership.
"The rigor will stay in place, but we want to make it more available and more affordable," he said, referring to the scores the Federal Housing Administration considers in underwriting loans.
Borrowers often use FHA loans to establish homeownership for the first time.
"This historic announcement by both FHFA and the FHA will result in modernization of the mortgage industry, delivering reduced mortgage risk, reduced costs for consumers and mortgage lenders, and enhanced mortgage access for creditworthy Americans," said Silvio Tavares, President and CEO of VantageScore, in a press statement.
Comments on FICO
FHA also will accept loans based on a FICO's competing 10T score, Turner said. 10T competes more directly with VantageScore 4.0 as it is a modernized metric, as opposed to the classic FICO scores both the enterprises and FHA have been relying exclusively on for years.
The enterprises also have been looking to add 10T but the release of historical data stakeholders in their market can use to assess it has been relatively slower to materialize.
Fannie and Freddie said in separate announcements that the latest version of historical data for both scores would be available this summer. Fannie said data from 10T will span April 2013 through September 2025. VantageScore's will span April 2023 through September 2025.
Mortgage Bankers Association President and CEO Bob Broeksmit said he anticipated "a speedy expansion to the program" because testing and validation of both scores are far along.
Pulte also said headway on 10T is being made while reporting that FICO's top executive had reportedly offered to drastically cut score costs outside of so-called success fees for funded loans.
FICO said in
The company also said that it "supports FHFA's announcement that the long-anticipated historical data for the FICO Score 10T will be released to enable industry evaluation."
Pulte and Turner said that housing officials' aim is not to play favorites when it comes to FICO and VantageScore, but to get them to square off against each other in a way that could lower housing costs and encourage innovation.
"We just want a competitive market," Pulte said.
Where the GSE stock offering plan stands
Pulte also faced questions about plans for potentially staging what some have loosely referred to as "initial public offering" for GSE shares, which already trade but haven't been eligible for institutional investment since the enterprises went into conservatorship during the Great Financial Crisis.
He responded by reiterating
"Only one gentleman who knows the status of the IPO, and his name is President Donald J. Trump, and so I would defer to him on the timing," Pulte said. "But I would say this, and Secretary Turner knows this, we stand ready every day to execute the President's vision, and if and when he decides he wants to do something, we are locked and loaded and ready to go."
