Federal Housing Finance Agency (FHFA) building in downtown Washington, D.C.
The Federal Housing Finance Agency has changed a rule, now allowing lenders to send just one credit score for loans delivered to Freddie Mac and Fannie Mae.
FHFA Director Bill Pulte announced in a tweet July 8 that the agency would allow lenders to provide government-sponsored enterprises with either a FICO score or a VantageScore 4.0, when it becomes available.
The rule stemmed from the Credit Score Competition Act that President Trump signed into law in 2018 to allow more credit scores than the classic FICO. After testing by Fannie Mae and Freddie Mac, FHFA in 2022 approved VantageScore 4.0 and FICO 10T as alternatives, but required both to be submitted when they become available.
FHFA said the new models take into account additional sources of data, including rent payment history, and have the potential to accurately score many more Americans missed under classic FICO.
Fannie and Freddie intend to implement FICO 10T, though there is not a timeline for action. The VantageScore 4.0 is also not yet in use because of technical issues that are being worked out. In the meantime, the GSEs are continuing to receive only classic FICO scores.
Greg Mesack, SVP of advocacy for America’s Credit Unions, said allowing lenders to choose just one credit score to provide will simplify and save costs in mortgage lending, in part by eliminating the need for credit unions to retool their computer systems to use two credit scores, instead of one.
“From the credit union perspective, you’re not going to have to rebuild all the systems and update all your computer models and that sort of thing,” Mesack said. “These systems have been around for a long time and changing and updating them is a lot harder than you would think.
“You can just stay with the existing if you want use FICO if that’s what your system is. If you have the capability, you can switch to Vantage, but you only have to send one.”
Having a choice of scores also might allow savings through price competition, he said.
Pulte’s change was also applauded by the Mortgage Bankers Association, the American Bankers Association, the Housing Policy Council and the Structured Finance Association. They called the change “a promising first step to our shared goal of a more efficient, more transparent and more competitive credit scoring system that serves as many creditworthy Americans as possible.”
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