New Mortgage score models accepted by Fannie Mae and Freddie Mac

[Zoostation1]

I started with a secured Discover when I began rebuilding not quite a year ago, and I hope it would make that more attractive. However a lot of the people opening accounts with those subprime lenders are starting there because there's no other options.  They're people who are getting declined for the more reputable ones. Regardless of that I would still be opposed to any model that penalizes the closing an account.

[LADave]

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@805orbust wrote:

I say bring it on.  They adjust, so will we. The market will determine the way forward. I wonder how many models have been created in the time since FICO 5, 4, 2, that were the "new thing"  that are irrelevant in mortgage apps. 

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It's being mandated that FICO 10T and VantageScore 4.0 will be used in mortgage apps with Fannie Mae and Freddie Mac, so those scores will be far from "irrelevant."

[pizzadude]

This article is basically stating that the older FICO mortgage scores will be phased out and eventually replaced by FICO 10T and VS4.0.   They're quoting what FHFA director ( Sandra Thompson ) stated recently at a Mortgage Bankers Association (MBA) Conference.

The biggest news in this article is the mention of a move from tri-merge to bi-merge reports for mortgage applicants.  

As this article is second-hand information I would consider it to be unconfirmed, at least until there is a direct quote or source from FHFA. 

The FHFA director said that FHFA has supported innovation and inclusion in the credit score models since 2014. The change to FICO 10T and VantageScore 4.0, however, will take time and require close coordination across the industry, meaning it will be a multiyear effort. 

FHFA said that the agency will conduct outreach to stakeholders to ensure a smooth transition. Once implemented, lenders will be required to deliver FICO 10T and VantageScore 4.0 for each loan sold to Fannie Mae and Freddie Mac. 

In addition to the new credit score models, FHFA also announced that enterprises will require lenders to provide credit reports from two of the three nationwide CRAs, going from a tri-merge to a bi-merge credit report requirement. 

“We expect this change will reduce costs and further promote innovation while not compromising accuracy and predictiveness of a borrower’s ability to repay,” Thompson said during the conference

https://www.housingwire.com/articles/fhfa-to-replace-classic-fico-with-more-inclusive-credit-model-s...

[Hex]

Another article about it. It is only about FICO 10T.

https://www.nasdaq.com/press-release/fannie-mae-and-freddie-mac-will-require-the-use-of-fico-score-1...

[Anonymalous]

@pizzadude, those are almost direct quotes from the FHFA press release:

https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-Validation-of-FICO10T-and-Vantage-Scor...

FHFA expects that implementation of FICO 10T and VantageScore 4.0 will be a multiyear effort. Once implemented, lenders will be required to deliver both FICO 10T and VantageScore 4.0 credit scores with each loan sold to the Enterprises.

....

FHFA also announced today that the Enterprises will work toward changing the requirement that lenders provide credit reports from all three nationwide consumer reporting agencies (CRAs). Instead, the Enterprises will require lenders to provide credit reports from two of the three nationwide CRAs. The Enterprises will work with stakeholders on a plan for implementing the change from a tri-merge credit report requirement to a bi-merge credit report requirement.

There's also a fact sheet:

https://www.fhfa.gov/Media/PublicAffairs/Documents/CS-Fact-Sheet-2022.pdf

On October 24, 2022, the Federal Housing Finance Agency (FHFA) announced the
validation and approval of both the FICO 10T and the VantageScore 4.0 credit score
models for use by Fannie Mae and Freddie Mac (the Enterprises). After a multiyear
transition period, lenders will be required to deliver loans with both scores when
available.

....

On October 24, 2022, FHFA also announced that the Enterprises will require two,
rather than three, credit reports from the national consumer reporting agencies. This
change to the Enterprises’ credit report requirements is expected to reduce costs and
encourage innovation, without introducing additional risk to the Enterprises.

(Emphasis in original.)

[pizzadude]

Thanks @Anonymalous for finding the press release, I guess it's official now

[Revelate]

So moving to either FICO 10T or VS 4.0 individually is stupidly easy for banks to do, I literally saw one make the decision to switch from EX FICO 2 to EX FICO 8 on a Friday afternoon and they were underwriting on the new score Monday morning.  Technically this is easy.

Process wise this is easy too, because conventional mortgages are bought up by Fannie / Freddie anyway, there's none of the back history or checking against old data for performance metrics that we see for things like credit card underwriting and anything the bank itself carries on it's books.

I have no **bleep** idea though how bimerge is going to work, like at all.  So we're going to get 4 scores total from 2 bureaus, which bureaus are picked and which of the 4 scores will matter when you no longer have a nice and tidy middle score?

I do wonder if the tiers will change to, I'm tempted to pull a FICO 1B report for EX just to see what my FICO 10T is on a gold plated file, it's over 50 points higher than EQ FICO 5 with my CO still open on it as it hasn't been deleted on that bureau yet (rude, yes I know my siggy is not right but lazy, 693 to 751).  

Final question do we really *know* that VS 4 is discounting closed accounts?  We've never been sure of that even on VS 3 AFAIK because Credit Karma and others are not reference AT ALL for the actual model and I don't think any of the CRAs have disclosed publicly?  I do suspect if this change happens rather quickly (it's only 2-3 organizations, CoreLogic and a few others that need to update their tech presumably for the bimerge report but then the lenders need to be able to analyze which score is reference for underwriting so maybe more) that the scores will be come far more readily available.

Either way, wow.  Finally.

Thank y'all for posting this.

[Revelate]

My gold plated EX file for giggles (zero inquiry, *almost* AZEO, just installment utilization is the only "problem" with the file these days).

EX FICO 2: 821

EX FICO 10T: 846

I wonder what's missing for 4 more points 

ETA: well crap I have 2 revolvers with balances actually, Zync had it's AF come due hahahahaha.

[Curious_George2]

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@Revelate wrote:

My gold plated EX file for giggles (zero inquiry, *almost* AZEO, just installment utilization is the only "problem" with the file these days).

EX FICO 2: 821

EX FICO 10T: 846

I wonder what's missing for 4 more points 

ETA: well crap I have 2 revolvers with balances actually, Zync had it's AF come due hahahahaha.

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It cares what your utilization has been for the past 24 months, right? 

Do we know if that's the only trend it cares about? Or will one's trends in, say, credit limits or the number of baddies, open accounts or closed accounts also affect 10T scores?

[Lou-natic]

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@Curious_George2 wrote:

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@Revelate wrote:

My gold plated EX file for giggles (zero inquiry, *almost* AZEO, just installment utilization is the only "problem" with the file these days).

EX FICO 2: 821

EX FICO 10T: 846

I wonder what's missing for 4 more points 

ETA: well crap I have 2 revolvers with balances actually, Zync had it's AF come due hahahahaha.

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It cares what your utilization has been for the past 24 months, right? 

Do we know if that's the only trend it cares about? Or will one's trends in, say, credit limits or the number of baddies, open accounts or closed accounts also affect 10T scores?

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"The FICO Score 10 Suite is the newest FICO credit scoring model, consisting of two scores: FICO 10 and FICO 10T. The FICO 10T credit score includes trended data, which looks at individual consumers' payment and debt history for the previous 24-plus months to help calculate their credit scores." So it appears they would be looking at utilization for every month going back 2 years instead of just the current month like they do with the older scores. So no more cheating doing AZEO the month before you apply for your mortgage to "boost" your scores to make things look good on paper.