Regulator opens mortgage pricing to VantageScore, ending FICO's grip
Fannie Mae and Freddie Mac will move to a single pricing grid that accepts either credit score.
Model house on a table. Photo: Unsplash (illustrative).
WASHINGTON, D.C. — The Federal Housing Finance Agency said Fannie Mae and Freddie Mac will combine their separate mortgage pricing tables into one unified grid — and that grid will treat VantageScore as an equal to FICO's classic score.
FHFA Director Bill Pulte announced the change on social media Monday, arguing that running two different grids made no sense.
What changes for borrowers
The pricing grids set loan-level price adjustments, the risk-based fees that help determine the final interest rate on a mortgage backed by Fannie or Freddie. Until now those fees were tied to FICO scores. Under the new approach, lenders can use either model, which means some borrowers could be priced on VantageScore, a rival score developed by the three major credit bureaus.
Supporters of the move say competition could lower costs for lenders and eventually for home buyers. Critics warn that letting lenders choose between models could invite them to pick whichever score looks better for a given loan.
The agency has not said when the unified grid will take effect.
Market reaction
Investors saw the announcement as a direct hit to Fair Isaac's most profitable business. The stock fell about 8% after hours on Monday and more than 20% in Tuesday's regular session, touching a multi-year low.
Sources
This article was written by Statevane from the reporting and official sources linked above. Spot an error? Tell us.