Plans to require financial institutions affiliated with Fannie and Freddie to use the FICO Score 10 T and VantageScore 4.0 models by the fourth quarter of 2025 are being eliminated, with a new implementation date “TBD.”
Whether you’re refining your business model, mastering new technology, or finding a strategy to take advantage of the next market boom, Inman Connect New York prepares you to take a bold step. The next chapter is about to begin. Please join us. Join us and thousands of other real estate leaders from January 22-24, 2025.
As it turns out, Fannie Mae and Freddie Mac won’t require lenders to switch to the new FICO Score 10T and Vantage Score 4.0 this year, but lenders will be able to make adjustments using historical data from Fair Isaac Corporation (FICO). Still waiting for release. Their underwriting model.
A plan introduced nearly three years ago by the Federal Housing Finance Agency (FHFA) requires financial institutions to begin using a new scoring model for all loans made to Fannie and Freddie in the fourth quarter of 2025. asked to do so.
Last July, Fannie and Freddie announced historical data aimed at smoothing the introduction of the new VantageScore 4.0 model, making similar historical data for FICO Score 10 T available “as soon as possible.” He said he is working with FHFA to do so.
Deadline for adoption of new credit score: “To be determined”
Source: Fannie Mae.
On Thursday, Fannie Mae and Freddie Mac said the release date for historical FICO Score 10T data remains “TBC” (TBD) and the mortgage giants have no plans to require lenders to begin using the new score in the future. The latest information was announced. Q4 2025.
An FHFA spokesperson said the agency supports “ongoing significant work and due diligence to accelerate adoption” of the new credit scoring model.
“A smooth transition requires sufficient time for all market participants to analyze, test, and ultimately adopt these measures,” FHFA said in a statement. “As was the case throughout the process, FHFA and [Fannie Mae and Freddie Mac] We will continue to prioritize transparency and stakeholder engagement during this transition period. ”
FHFA, Fannie Mae, and Freddie Mac declined to comment on whether the release of historical FICO Score 10T data has delayed implementation of the new scoring model.
A Fair Isaac spokesperson said in a statement that the company “has been active over the past year and continues to actively work with FHFA and FHFA.” [Fannie Mae and Freddie Mac] Give stakeholders access to the FICO Score 10 T dataset. We look forward to completing these efforts. ”
In addition to requiring lenders to phase out the classic FICO scoring model that has been in use for nearly 30 years, the FHFA this year also announced that consumers across the country The plan was to be able to provide loans using credit reports from any two of the reporting agencies. tri-merge” is a report from all three companies.
A Fannie Mae spokesperson said implementing the credit scoring model and reporting “requires a number of important milestones to ensure a smooth process for lenders and stakeholders.” Providing more time based on industry feedback will allow for thoughtful and successful implementation. We remain committed to working closely with all industry stakeholders to ensure the market has time to plan and understand the transition. ”
The move to give lenders the option to order “double-merged” credit reports is aimed at simplifying the process and saving borrowers money.
With an October 2023 timeline, FHFA, Fannie Mae, and Freddie Mac will allow lenders to have the option to use ByMerge credit reports in the first quarter of 2024 to support updates to their credit scoring models. He said historical data for FICO score 10T and VantageScore 4.0 will be made public. Mandatory implementation of the new scoring model and retirement of the classic FICO model is set for Q4 2025.
This timeline comes two days after four House members (two Democrats, two Republicans) asked FHFA Secretary Sandra Thompson to stick to the timeline mandating the use of the new credit scores in 2025. It was published a month later. Thompson was reminded of that timeline, which is mandated by Congress in the Economic Growth, Deregulation, and Consumer Protection Act of 2018.
“Congress knows that competition within the financial services sector benefits everyone,” Thompson wrote on July 31, 2023. “We cannot tolerate any further delays in introducing new credit scores for loans.” market. Every day, delays in this process mean that working people who pay their bills on time are unable to get a mortgage, finance higher education, or get a small business loan. , this is the real human cost. ”
Thompson, who has led FHFA since June 2021, is scheduled to step down on January 19, and President-elect Trump has named private equity CEO and philanthropist Bill Pelt to succeed her. The move is seen as a potential step toward privatizing Fannie & Fund. Freddy.
In addition to introducing competition, backers are touting the new VantageScore 4.0 and FICO Score 10 T credit scoring models as more comprehensive and accurate.
VantageScore is a joint venture of the three largest national consumer reporting agencies: Equifax, Experian, and TransUnion. VantageScore claims that next year’s introduction of VantageScore 4.0 will increase the eligible pool of mortgage applicants by more than 2.5 million borrowers, representing $1 trillion in potential new mortgage volume.
Fair Isaac Corp. says lenders with a FICO score of 10T can increase loan amounts by up to 5% without taking on additional credit risk, or extend the same amount of loans while reducing default risk and losses by up to 17%. He claims he can continue.
The company states that “FICO Score 10 T continues to be rapidly adopted for use by key segments of the mortgage industry.” [Fannie Mae and Freddie Mac’s] FICO Score Requirements. ”
Cardinal Financial recently packaged the first government-issued mortgage-backed securities (MBS) pool to incorporate VA loans underwritten using a FICO score of 10T. As a result, they found that “the vast majority of borrowers now have higher credit scores, which enables them to offer more favorable loan terms.” Fair Isaac said in a statement:
Editor’s note: This article has been updated to include comments from Fair Isaac Corp. and Fannie Mae.
Get Inman’s Mortgage Overview Newsletter delivered straight to your inbox. Get the world’s biggest mortgage and closing news all in one place every Wednesday. Click here to subscribe.
Email Matt Carter
