This battle over credit scores could shake up the mortgage market

Non-bank lenders want FHFA to branch out from FICO

TRD NEW YORK /
Jan.January 03, 2018 10:05 AM

FHFA Director Melvin Watt

Millions in home mortgages may be on the line as the Federal Housing Finance Agency debates whether to accept a new credit scoring system for loans backed by Fannie Mae and Freddie Mac.

Currently, Fannie and Freddie won’t buy mortgages unless lenders assessed the borrowers using the FICO credit score, which was created decades ago by Fair Isaac Corp. But several non-bank lenders argue that the system is too restrictive and excludes millions of potential borrowers from the mortgage market. They want the FHFA to start accepting VantageScore, a rival credit scoring system created by Equifax, Experian and TransUnion.

Last month, the FHFA asked lenders to chime in on the issue as it weighs a decision, the Wall Street Journal reported. Because around half of all U.S. mortgages are backed by Fannie and Freddie, the decision could have a big impact on the housing market.

VantageScore argues that it could assign credit scores to 30 million more people than FICO and potentially make 7.6 million more people who use little to no credit eligible for a mortgage. “Doing something just because you’ve always done it that way isn’t a good enough reason,” Mat Ishbia, CEO of United Wholesale Mortgage, told the Journal.

But some banks worry that a change could loosen lending standards and lead to more defaults. [WSJ]Konrad Putzier 


Related Articles

arrow_forward_ios
With a cooling trade war, stocks perform well, including real estate. (Credit: iStock)

Real estate stocks push up this week as U.S.-China trade tensions ease

416 West 25th Street and Maverick Real Estate Partners principal David Aviram (Credit: Google Maps and LinkedIn)

Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case

Centrale at 138 East 50th Street and Ceruzzi Properties’ Arthur Hooper (Hooper by Sasha Maslov)

Ceruzzi Properties secures $350M to refi Midtown East tower

Denizen Bushwick at 54 Noll Street (Credit: iStock, Google Maps)

All Year closing in on $675M refi for Rheingold Brewery development

Denizen Bushwick at 54 Noll Street (Credit: Google Maps, iStock)

A major Bronx landlord is shorting All Year’s bonds. Are his concerns legit?

CrowdStreet CEO Tore Steen (Credit: iStock)

CrowdStreet hits $1B milestone, crowdfunding firm claims

Boris Santos

A win for real estate: Socialist candidate halts Assembly bid

From left: 55 East 74th Street, 9 East 82nd Street, 1 Central Park South, 78 Irving Place with Adam Neumann and 111 West 57th Street (Credit: StreetEasy, Wikipedia, Getty Images)

Adam Neumann’s triplex, Russians’ Plaza pad were priciest homes listed last week

arrow_forward_ios
Loading...