Fitch Rating Mortgages Based on VantageScore

Fitch Ratings is the first rating agency to rate mortgage loans based on VantageScore, the algorithm created by the three credit bureaus to compete with Fair Isaac. "The mortgage crisis has not only shown that a multitude of factors influence the performance of high risk loans, but has also underscored the need for an improved generic consumer scoring model against which mortgage lenders can more reliably make their loans," said group managing director Huxley Somerville, who heads Fitch's U.S. RMBS group. "Built using data that includes the dramatic rise in consumer indebtedness in recent years and regularly revalidated to ensure the model's continued predictiveness, VantageScore has shown to be more accurate than FICO because it excludes the use of authorized trade lines." The latest version of FICO had originally excluded authorized trade lines, but Fair Isaac said the feature is being added back into FICO 08 because of concerns related to the Equal Credit Opportunity Act. Fitch has fully incorporated VantageScore into ResiLogic 2.1, a quantitative model that provides credit risk analysis at the individual loan and pool level for residential mortgage loans.