MBA Breaking Advocacy Update: FHFA Publishes Credit Score Implementation FAQs
Yesterday afternoon, Federal Housing Finance Agency (FHFA) Director Bill Pulte posted on X a two-page Frequently Asked Questions (FAQ) document that provides much-needed information on last week’s announcement that Fannie Mae and Freddie Mac (the GSEs) will begin to accept loans originated using VantageScore 4.0.
MBA over the last week has reiterated in conversations with its members, the GSEs, and the media that there are many open questions that need to be resolved before the GSEs can accept delivery of these loans. Director Pulte’s published FAQ provides the first round of necessary details, highlighting the initiative is a work in progress, and that additional details will be provided in the weeks ahead.
Go deeper: Key takeaways from the FAQ are:
• The GSEs will permit lenders to deliver mortgage loans using a credit score generated by either the Classic FICO model or the VantageScore 4.0 model, but for the time being will not accept scores from multiple models on a single loan.
• Lenders can choose to report different credit scores on different loans – e.g., VantageScore 4.0 on one loan and FICO Classic on another (just not two scores on single loan). The GSEs will develop “appropriate risk mitigants” to ensure safety and soundness.
• FICO 10T remains a validated credit score model and is planned for future use, though it is not available for loan deliveries now.
• The GSEs will announce changes to their Selling guides in a future release. An implementation date was not provided.
• As initially reported, the credit reporting requirement will “stay tri-merge.” Importantly, however, the FAQs state that FHFA will continue assess the credit reporting requirements in the future to lower costs for consumers and promote competition and innovation. MBA will use this opportunity to continue exploring a single-file credit report option and other approaches to lowering credit reporting costs.
Why it matters: As reiterated in its own statement shared with media, as well as a joint statement along with other industry trades, MBA has consistently advocated for increased competition in credit reporting and scoring and welcomes reforms that will lower costs for consumers. FHFA’s announcement to allow lenders to use VantageScore 4.0 could help to accomplish the goals of added competition in the credit score space and reduced consumer costs, if implemented correctly.
What’s next? MBA will continue engaging with the GSEs and FHFA to resolve the many operational questions that remain, including Loan Level Price Adjustment grids, minimum credit score eligibility, and business rules around using different scores and different loans. In addition, questions remain on the implications for mortgage insurance pricing and investor acceptance of VantageScore 4.0.
For more information, please contact Sasha Hewlett at (202) 557-2805 and Brendan Kelleher at (202) 557-2779.
