From the January issue: Borrowers probably know that their credit score is a crucial factor in their ability to qualify for a mortgage. They might also know that their score can vary depending on the type of scoring model their lender uses. If it’s an old, outdated version, they might get a lower score. If it’s a newer, more advanced model, they’ve got a better shot at being scored more fairly.
That brings up a long-festering controversy: The two behemoths of the mortgage business — Fannie Mae and Freddie Mac — continue to use a credit scoring model that even its developer, FICO, says is not as “predictive” as its much newer models. Worse yet, Fannie and Freddie require that all lenders who want to submit loan applications to them must use the same, outdated technology. [more]