The annual progress report on the Fannie Mae and Freddie Mac conservatorships reiterated that a new credit score model will likely not be operational until after the implementation of a new Single Security Initiative.
The $446 million Pearl Street Mortgage Company 2018-1 Trust is backed by 30-year, fixed-rate loans with credit characteristics in line with recent private-label prime jumbo transactions rated by Fitch Ratings.
Consumer credit scores are improving, but many qualified borrowers are still hesitant about buying a house. New tools are helping lenders better assess risk and show consumers with lower credit scores they can qualify for mortgages.
The two government-sponsored enterprises have relied on the “classic” FICO credit scoring model for the past 12 years. But the Federal Housing Finance Agency is weighing whether the GSEs should upgrade to more recent scoring alternatives.
Competition in other areas of consumer lending has driven both VantageScore and FICO to build credit scoring models that are more accurate and more consumer-friendly. Permitting that competition in the mortgage market can increase certainty for lenders and transparency for investors.