Accenture Credit Services’ Lynn Grich: There’s More Change Coming

The latest mortgage industry evolution is the upcoming changes to the Credit Score Model. To better understand this complicated and swift-moving change, MBA NewsLink interviewed Lynn Grich, vice president of compliance & risk for Accenture Credit Services, to learn more about what is coming.

MBA NewsLink: What is the purpose and intent behind the FHFA-sponsored credit model change?

Lynn Grich: This is an invitation to alternative creditors that have historically not reported directly to the credit bureaus to contribute to the FICO score output. The intent is to close the gap for the approximately 34 million people that were unscoreable and, therefore, invisible to lenders.

NewsLink: Who are these alternative creditors?

Lynn Grich: These creditors can be landlords, utility companies and telecom payments.

NewsLink: What is the goal of this change?

Lynn Grich: To create the opportunity for the unscoreable and credit invisible to become candidates for lending options.

NewsLink: On the surface, this sounds like a positive move, but I hear rumblings of resistance. Why the consternation?

Lynn Grich: The impact of this change is significant as it affects the entire life cycle, starting with the loan officers and ending with the servicers.

NewsLink: This sounds complicated. Can you tell me more?

Lynn Grich: It sounds complicated because it is. The loan officers will need to learn how to read the new bureaus, underwriting models and underwriters will need to adapt, LOS and servicing systems will have to change to accommodate the new scores. There also needs to be alignment with the participating credit repositories with regulatory risk. Those are just a few of the things we know about now.

NewsLink: You mentioned new bureaus. These aren’t the three credit repositories we are accustomed to?

Lynn Grich: No, there are significant differences in the proposed model, starting with the scoring. There will be only two scores, which will be provided by Vantage Score and Fico Score 10-T. The new repositories have usage weights that vary for the current risk interpretation while there is improvement to collection account influences. 

NewsLink: What is the delivery process for this and what does the timeline look like?

Lynn Grich: For a certain amount of time, lenders will be responsible for pulling both versions, meaning they will need to pull and review both a tri-merge and the new model. This is slated to begin in third-quarter 2024. The tri-merge won’t be sunset until the fourth quarter of 2025, when the new model becomes official. The downstream results have the potential to be expensive. Originators will carry the burden of the increased costs of pulling both models and investors will likely have increased collection costs. The unintended consequence is higher costs all around for the borrowers. Adding to the already complicated change is the consistency of the new models. We have limited data to prove out all variables that could potentially be revealed later while in use.

NewsLink: I’m assuming that once this new model is in use, it will become evident. Who is going to be responsible for monitoring that?

Lynn Grich: It will have layers of regulatory accountability via ECOA, GSE legal review, and potentially more as this continues to be vetted, just to name a few.  

NewsLink: This is a lot to digest.  Is there any training available?

Lynn Grich: Yes, there are several groups that are providing training as well as collecting feedback. The new bureaus, Vantage Score and Fico Score 10-T are participating as well as the Mortgage Bankers Association, FHFA and MISMO.