The Federal Housing Finance Agency (FHFA) announced proposed implementation timelines for the use of the FICO 10T and the VantageScore 4.0 credit score models by Fannie Mae and Freddie Mac. In concert, the government sponsored enterprises also plans to transition to two, rather than three, credit reports from the national consumer reporting agencies within a year.
According to the proposed implementation timeline, the FHFA would gather industry feedback in the second quarter of 2023, publish Classic FICO data to support the credit report update in the fourth quarter of 2023, and move to a bi-merge system from a tri-merge system in the first quarter of 2024. The FHFA would begin delivering and disclosing FICO 10T and VantageScore 4.0 historical data to support credit model updates in the first quarter of 2025. By the fourth quarter of 2025, the FHFA will have incorporated credit score model updates into capital and pricing.
“These changes are expected to further support accuracy, innovation, and inclusion in credit score models and to reduce costs and encourage innovation in credit report requirements,” the FHFA said in a statement Thursday.
When the move from the Classic FICO model was announced in October, the FHFA said the changes would result in new payment histories for borrowers, including rent, utilities and telecom payments for the first time.
Although the new credit modeling represents a welcome change for much of the industry, several stakeholders have expressed concern with FICO’s pricing changes in recent months.
In a letter dated Nov. 22, the National Consumer Reporting Agency told its members that the “vast majority” of mortgage lenders would see price increases between 10% and 400% from Fair Isaac Corp. (FICO).
The letter, signed by NCRA Executive Director Terry Clemans, said there would be “a wholesale price increase of less than 10% for the top tier of approximately 46 lenders, about 200% for approximately 6 lenders in the middle tier, and more than 400% for all other mortgage lenders in the nation.”
In a statement to HousingWire, FICO at the time said its pricing remains “exceedingly low compared to the value that the FICO Score provides as one of the most important components in facilitating approximately $2 trillion in mortgage originations every year, and disproportionately low when compared to its royalty rates for other markets.”