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2 Big Mortgage Programs Are Re-evaluating Credit Worthiness.
Due to a new rule issued on Tuesday by the mortgage-finance giants’ federal overseer, Fannie Mae and Freddie Mac, will have to consider new alternatives to FICO to determine an applicant’s creditworthiness. This ruling, executed by the Federal Housing Finance Agency, is extremely beneficial to the credit score system “VantageScore”, which is owned by the three credit reporting giants, Equifax, TransUnion and Experian.
“One of my priorities is to ensure that the American people have a safe and sound path to sustainable homeownership, which requires tools to accurately measure risk,”
FHFA Director Mark Calabria described in his written statement. Mr. Calabria later added that this new rule
“is an important step toward achieving that goal.”
“The FICO Score has been the industry standard for credit scores for decades because it is trusted by lenders to be independent, predictive and reliable, and we are confident that it will remain the superior choice by any measure established by [Fannie and Freddie],”
Joanne Gaskin, the company’s vice president of scores stated regarding the FHFA rule.
Small Lenders Make Big Impacts
Nonbank lenders have asked for the ability to use a credit score provided by VantageScore in the process of determining the creditworthiness of those applying for mortgages. These lenders, who make up more than half of the mortgage dollars issued in America, state that these alternative scores would allow for a greater amount of people to enter the mortgage market and lead to an increased number of mortgage approvals. The end result is hypothesized to provide a potential boost to home sales along with the economy in general.
A step in the right direction
Tuesday’s final rule is extremely advantageous to VantageScore because it abolishes language from a December proposal that would have prohibited any credit-score models developed by a company related to a credit-reporting firm. The FHFA eliminated that restriction amid pushback from the credit-reporting industry and congressional lawmakers. Without the beneficial addition of VantageScore to the lending scene, the monopolization of Fico when determining applicant's creditworthiness would keep us from progressing to a new age of economic well being. We as a company never really thought this day would come but it appears it has. Credit Law Center views this a positive movement for the credit industry and a huge step in the right direction.
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Fannie and Freddie to use Vantage Score
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