Last week the Community Home Lenders of America (CHLA) penned a letter to the Federal Housing Finance Agency (FHFA) stating that the pending addition of updated Credit Scores at Fannie Mae and Freddie Mac could be more manageable if done one at a time. Specifically, they stated the need to add VantageScore first. This is because of a steep price hike in the cost of services provided by FICO. The CHLA recommends phasing in the new FICO 10T requirement at a later phase.
From CHLA’s mission statement, you can see why they feel the importance: “The Community Home Lenders of America (CHLA) is a national non-profit association of small and mid-sized community-based mortgage lenders. The mission of the CHLA is to promote federal mortgage programs, rules, and regulations which treat community mortgage lenders fairly, and which reflect the critical importance that community mortgage lenders play in providing broad access to credit for borrowers, in increasing competition in mortgage markets, and in providing borrowers with quality mortgage services and access to loans at a local level.
Also stated in this letter CHLA posed concerns with what is considered to be bulk pricing of credit “bundles” that are currently required to sell mortgages to Fannie and Freddie. Sandra Thompson, Director of the FHFA, stated the concerns from CHLA that this type of pricing is “out of step with “at least the spirit” of the guarantee fee parity. The parity lies with concerns that larger lenders receive more favorable terms for the loans the two GSE’s purchased in the past. Fannie and Freddie to action to ensure that smaller lenders received more equitable pricing as compared to their larger counterparts.
The National Mortgage News stated “Freddie and Fannie don’t directly control pricing for credit measures but their requirements essentially compel the lenders they work with to invest in certain consumer scores and reports as sales to the GSEs are contingent on submission of that information. Lenders don’t have to sell to Fannie and Freddie, but the two GSEs currently play such a large role in the U.S. mortgage market that it can be challenging not to rely on them, particularly at nonbanks that typically don’t hold loans in portfolio.”
A true time-line and date has not been set to when VantageScore 4.0 will be used for mortgage lending. But if the CHLA’s letter holds any weight, it may be sooner than first thought. “The newer credit score models Freddie and Fannie are moving toward were designed to incorporate broader ranges of borrower data than the older model currently used, potentially qualifying a more expansive group of borrowers for mortgages and homeownership.”
