A roadblock that derailed plans to allow mortgage giants Fannie Mae and Freddie Mac to begin accepting more inclusive credit scores this year is now in the process of being dismantled, with Fair Isaac announcing it has reached an agreement to begin making historical FICO Score 10T data available to lenders within weeks.
Fannie and Freddie’s regulator, the Federal Housing Finance Agency (FHFA), had planned to retire the FICO Classic score and require lenders to start using both FICO Score 10T and Vantage Score 4.0 scoring models during the fourth quarter of this year.
The scoring models — which consider trended credit data and additional inputs such as rent, utility and telecom payments that their backers say will help more people qualify for loans — were validated for use by Fannie and Freddie in October 2022.
But while lenders got access to historical VantageScore 4.0 data needed to recalibrate their systems in July 2024, Fair Isaac and FHFA have been at loggerheads over providing the same access to FICO Score 10T historical data.
FHFA Director Bill Pulte announced on Nov. 10 that the agency was “very close to a deal” with Fair Isaac.
While there’s been no official announcement from the FHFA, Fair Isaac executive Julie May says the terms and conditions for releasing historical FICO Score 10T data have been agreed to.
“In the coming weeks, the three credit bureaus will deliver FICO Score 10T data to the GSEs [Fannie Mae and Freddie Mac],” May said in a Dec. 1 blog post. “We expect that the GSEs will conduct their own validation of the data and make FICO Score 10T historical datasets, which will be updated to also include more recent data through 2025, accessible to market participants.”
In addition to lenders, investors in mortgage-backed securities and third-party risk modelers will use the historical data to validate credit score performance, risk modeling, and compliance with regulatory requirements, May said.
“This represents a significant step forward in bringing much-needed competition to the credit score marketplace,” an FHFA spokesperson said in a statement to Inman.
The FHFA spokesperson would not say when Fannie and Freddie will be able to accept VantageScore 4.0.
Pulte ordered the mortgage giants to start accepting VantageScore 4.0 in July, but adoption is a “complex, technical and arcane” process that could drag into next year, a spokesperson for the industry trade group Community Home Lenders of America told Inman last month.
VantageScore is a joint venture launched by the big three credit bureaus — Equifax, Experian, and TransUnion — to compete with Fair Isaac.
When doing business with Fannie and Freddie, lenders must obtain “tri-merge” credit reports that run borrower data collected by each credit bureau through an approved credit scoring algorithm — FICO Classic, for now.
Rankled by price increases by Fair Isaac and the credit bureaus, the Mortgage Bankers Association is pushing to allow lenders to move to single-file reports, which would generate a single credit score with information from one credit bureau.
“Single-file reports are used safely in nearly every other consumer finance market, and extending them into the mortgage market would provide price relief for American homebuyers by injecting real competition, lowering closing costs, and streamlining the mortgage process, all without compromising sound risk management,” MBA President Bob Broeksmit said in a statement.
The FHFA under the Biden administration had proposed moving to a bi-merge credit reporting system, which TransUnion has said could hurt borrowers with poor credit.
In ordering Fannie and Freddie to start accepting VantageScore 4.0 in July, Pulte said the FHFA would stick with tri-merge reporting, for now.
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