Fannie Mae and Freddie Mac Adopt VantageScore 4.0
Under FHFA guidance, the GSEs will now permit all approved lenders to use the alternative credit score model for single-family mortgage origination and delivery.
In a significant shift for the U.S. mortgage market, Fannie Mae and Freddie Mac now permit all approved lenders to use VantageScore 4.0 for single-family loan originations. The move, directed by the Federal Housing Finance Agency (FHFA), elevates the alternative credit score model from a limited pilot to full-scale deployment, and the Government-Sponsored Enterprises (GSEs) have updated their automated underwriting systems accordingly. Counsel for mortgage lenders should take note, as this change introduces new operational flexibility and complexity. While lenders may now choose between VantageScore 4.0 and Classic FICO for most loans, they must use the same model for all borrowers on a single mortgage and must continue using Classic FICO for manually underwritten loans. The development could expand the pool of eligible borrowers but requires careful implementation to align with updated loan-level price adjustments. Lenders should watch for forthcoming updates to the GSEs' selling guides and any future announcements regarding the still-ineligible FICO Score 10T.