Mortgage lender choice among credit scoring model alternatives reportedly took a step closer to reality, as both Fannie Mae and Freddie Mac supposedly completed the validation phase for VantageScore, a note from Compass Point said.
"The next steps involve working with originators to implement VantageScore into the underwriting systems," said the report from Compass Point analyst Ed Groshans. If accurate, a roll out would then be expected in the first quarter of next year, based on a 2019 timeline published by VantageScore, Groshans continued.
However, VantageScore, the government-sponsored enterprises and their regulator, the Federal Housing Finance Agency, all declined to verify or comment on this report.
"Prior to going live, we anticipate that FHFA will issue a press release stating that the validation and approval of VantageScore for use by Fannie Mae and Freddie Mac," Groshans said. "We expect the Federal Housing Administration will also include VantageScore into its underwriting system, but this will occur after the GSEs complete their system rollout."
VantageScore, a joint venture between the three largest repositories, Equifax, Experian and TransUnion, has a minimal share in the mortgage market because it is not approved for use in Freddie and Fannie's automated underwriting systems.
In 2017, the FHFA
The May 2018 regulatory reform act required
In August 2019, the FHFA reversed course from a previous proposal that
A March FHFA virtual hearing
"While it is our understanding that the GSEs are working to implement VantageScore into the underwriting process, it is unclear which, if any, if these options were selected," Groshans said, adding that after the hearing, it was apparent many parties were pushing for the
"In our view, lender choice would be aligned with the administration's goals of increasing access to affordable housing and affordable credit, but we will have to wait for the FHFA's announcement to know the outcome," Groshans said.
VantageScore has
"CHLA has consistently supported FHFA efforts to encourage Fannie and Freddie to utilize alternative and appropriate credit scoring options," Scott Olson, executive director of the Community Home Lenders of America, said in a statement. "Reports that the GSEs may soon be at the phase of reaching to originators to make this a reality would mean that our members would be able to help more underserved but qualified homebuyers who previously were excluded by unduly rigid credit score parameters."
The Mortgage Bankers Association said any decision about credit scoring models has to be data driven and transparent and expand access to those difficult to evaluate in older versions, in its March 2022 letter to Sandra Thompson, now the full-time FHFA director, on the agency's four year plan.
"FHFA should take a conservative approach with respect to the timelines by which use of a new model or models is made mandatory," the MBA letter said. "It also is imperative that FHFA and the Enterprises continue to engage with the industry and relevant stakeholders as this process unfolds to provide guidance and resources, where necessary, to address any implementation hurdles."