Here’s a breakdown of the key information from the provided text:
Fannie Mae and Freddie Mac will now allow lenders to use VantageScore 4.0. This is a important shift as they previously only accepted FICO scores.
The stated goals are to increase competition and lower costs. This move is framed as fulfilling a promise made by President Trump. FICO’s stock price dropped significantly. Shares of FICO fell over 17% after the announcement, indicating investor concern.
VantageScore has been gaining traction. Created in 2006 as a competitor to FICO, it’s now becoming more widely accepted.
Previous steps were already being taken to diversify credit scoring. The FHFA announced in 2022 that lenders would eventually need to submit both FICO and VantageScore data.
Increased scrutiny of mortgage fees. The Consumer Financial Protection Bureau (CFPB) launched an inquiry into “junk fees” related to mortgage closing costs, including credit report fees.
* FICO has historically dominated the market. The text highlights FICO’s long-standing dominance in the mortgage credit scoring landscape.
In essence, this news signals a disruption to the established credit scoring system in the mortgage industry, aiming for more competition and potentially lower costs for consumers.