The US government’s plan to introduce competition for FICO credit scores through Vantage Score aims to expand mortgage access for ‘credit invisible’ borrowers, potentially revealing 5mn more mortgage-ready Americans. Backed by Experian, Equifax, and Trans Union, Vantage Score uses a different algorithm that may lower rates and increase lending. Federal housing tsar Bill Pulte supports the shift, which already knocked $4bn off Fair Isaac’s market value.
Fannie Mae and Freddie Mac will now accept Vantage Score equally, removing prior loan surcharges. While Rocket Mortgage welcomes the change, asset managers warn it could weaken underwriting standards and increase risk in mortgage-backed securities. Critics liken the move to credit rating agency fragmentation pre-2008, fearing borrowers will seek lenient scorers.
If asset managers discount FICO-linked bonds due to perceived political pressure, the policy may backfire, undermining its goal of boosting affordable home lending.
Source: Financial Times Companies · Summarized by HeadlinesBriefing