Fannie Mae, Freddie Mac to require new credit score models

The Federal Housing Finance Agency today announced the approval of the FICO 10T and VantageScore 4.0 credit score models for use by Fannie Mae and Freddie Mac. The agency also announced that the GSEs will require two, rather than three, credit reports from the national consumer reporting agencies.

FHFA expects implementation to be a multiyear effort, but once in place, lenders will be required to deliver both FICO 10T and VantageScore 4.0 credit scores with each loan sold to the GSEs. Fannie Mae and Freddie Mac have relied on classic FICO scores for nearly 20 years. Implementation of the new FICO and VantageScore models will improve accuracy by capturing new payment histories for borrowers when available, such as rent, utilities and telecom payments, the agency said. ABA has commented extensively to FHFA regarding credit scores. ABA supports the expansion of credit score models to safely and reliably expand credit access, but has raised concerns that any new requirements do not impose additional costs for lenders or borrowers and do not subject lenders to new liability for the use of any approved credit score model.

FHFA also announced Fannie Mae and Freddie Mac are changing guaranteed fee pricing by eliminating upfront fees for certain borrowers and affordable mortgage products while implementing increases to upfront fees for most cash-out refinance loans. Upfront fees are eliminated for first-time homebuyers at or below 100 percent of area median income in most of the United States and below 120% of AMI in high-cost areas; HomeReady and Home Possible; HFA Advantage and HFA Preferred loans; and single-family loans supporting the Duty to Serve program. The starting date for the fee eliminations will be announced at a later date.

The implementation of new fees for cash-out refinance loans will begin Feb. 1, 2023, to minimize market and pipeline disruption, FHFA said. The pricing changes will build upon the upfront fee increases for second-home loans and high-balance loans announced in May.