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3w ago

FHFA Allows VantageScore 4.0 for Fannie and Freddie Mortgages as FICO Shares Plunge

It will let lenders adopt a rival score without new systems to cut closing costs.

A row of houses are seen in Charlotte, North Carolina on June 14, 2014.
Mortgage borrowers are in for a big change.
Both FICO and VantageScore issue credit scores with the goal of predicting the likelihood that a person will fall behind on debt repayments, but the two companies have differing methodologies to arrive at that score.
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Overview

  • FHFA Director Bill Pulte announced on July 8 that lenders may immediately use VantageScore 4.0 for government-backed Fannie Mae and Freddie Mac loans without building new infrastructure.
  • The policy aims to break FICO’s near-monopoly and foster competition in the credit-score ecosystem.
  • FICO’s stock tumbled more than 17% intraday after investors reacted to the end of its exclusive status.
  • VantageScore 4.0 factors in rent and utility payments to better evaluate borrowers with thin credit files and boost access for underrepresented communities.
  • Lenders’ adoption remains uncertain due to their limited experience with VantageScore and unclear standards for reporting and verifying alternative payment data.