Overview
- FHFA Director William Pulte announced that Fannie Mae and Freddie Mac will immediately allow lenders to use VantageScore 4.0 alongside FICO for government-backed mortgage underwriting.
- Shares of Fair Isaac Corporation tumbled more than 17% following the announcement, reflecting investor concern over FICO’s long-standing market dominance.
- VantageScore 4.0 incorporates alternative data such as rent and utility payments to better evaluate borrowers with limited credit histories.
- Analyst Jaret Seiberg cautioned that banks’ limited experience with VantageScore and strict underwriting standards may slow lenders’ uptake of the new model.
- The change aligns with federal efforts by the FHFA and CFPB to curb mortgage junk fees and expand credit access for underbanked borrowers.