Fannie Mae and Freddie Mac’s federal regulator is “very close” to a deal that would allow the mortgage giants to accept Fair Isaac’s more inclusive FICO Score 10 T, Federal Housing Finance Director Bill Pulte said Monday.
The FHFA has been working for several years on plans to replace the FICO Classic score in use for nearly three decades with VantageScore 4.0 and FICO Score 10 T, which consider trended credit data and additional inputs such as rent, utility and telecom payments.
Both of the new scores are already used by lenders for loans not sold to Fannie and Freddie, and backers say they could help millions more borrowers qualify for loans once approved for use by the mortgage giants.
The FHFA under the Biden administration had planned to require that lenders start using both VantageScore 4.0 and the new FICO Score 10 T algorithm by Oct. 1. But FHFA suspended that timetable in January, with lenders still waiting for historical data for FICO Score 10 T that would allow them to update their procedures.
Lenders were provided with historical data for VantageScore 4.0 in 2024, and Pulte announced in July that Fannie and Freddie would start taking loans scored with the new algorithm — setting the stage for VantageScore 4.0 to go head-to-head with the less inclusive FICO Classic score.
Before that can happen, Fannie and Freddie must publish updated loan-level price adjustments (LLPAs) for any new scores — a process one industry expert told Inman may not be complete until later next year.
For now, Fannie and Freddie still require lenders to use FICO Classic, although Fannie Mae on Nov. 5 eliminated a minimum credit score requirement for applications processed by its automated Desktop Underwriter tool.
VantageScore is a joint venture launched by the big three credit bureaus — Equifax, Experian, and TransUnion — to compete with Fair Isaac.
Pulte and mortgage lenders have expressed concerns about Fair Isaac’s price increases, which Community Home Lenders of America (CHLA) claims total 700 percent over the past three years.
Allowing Fannie and Freddie to accept both VantageScore 4.0 and FICO Score 10 T would potentially open up competition while preserving a more level playing field than if VantageScore 4.0 went up against FICO Classic.
“We are currently reviewing a potential deal with Fair Isaac, FICO, on implementing their new credit score, FICO 10T,” Pulte announced Monday on the social media platform X. “This would be great for consumers and the safety of the mortgage market, to have both FICO 10T Score and Vantage Score 4.0. Stay tuned! Very close to a deal.”
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