Pulte also provided updates on LLPA changes, Fannie/Freddie IPO
FHFA director Bill Pulte and HUD secretary Scott Turner announced in a joint news conference on Wednesday changes to the accepted credit scores for Fannie Mae, Freddie Mac, Ginnie Mae, and FHA loans.
Selling guides for Fannie Mae and Freddie Mac were updated on Wednesday to reflect that VantageScore 4.0 could be accepted immediately. Turner said that HUD would accept VantageScore and FICO 10T soon.
Pulte said VantageScore pulls would be 99 cents a loan. He said he received a phone call from FICO before the event, and was hopeful it would look into lowering its price from $10 per loan to 99 cents as well.
One of the biggest benefits that Pulte discussed in adding VantageScore was the ability to account for rent payments in a customer’s credit score.
Pulte criticized the three credit bureaus – Experian, Equifax, and TransUnion – for the rising costs of credit reporting, while also praising the low cost of VantageScore, which is owned by the three credit bureaus. Brokers have been frustrated, saying that the industry has “reached the breaking point” on soaring credit reporting costs.
He also said certain lenders have already been accepting VantageScore loans.
“Fannie and Freddie are ready to immediately start working with approved lenders to accept VantageScore loans,” Pulte said. “To that end, we’ve been quietly working on something, which we’re announcing today, that lenders have already started accepting VantageScore loans. Freddie Mac has taken a delivery already of $10 million worth of VantageScore loans in an initial operational test, and we will be securitizing them soon.
“We know that there’s been a lot of market demand for us, so we’ve received interest from mortgage lenders, including the nation’s largest lenders, about taking the VantageScore loans. So about 21 lenders in the initial pilot will be able to do it. When I say pilot, it’s not really a pilot because now it’s a very real thing.”
Separate pricing guides
Pulte said that there will be new separate pricing guides for Fannie Mae and Freddie Mac for VantageScore loans to accurately reflect the different risks involved.
“Fannie and Freddie will also have new separate pricing guides for VantageScore loans to accurately reflect the way the different models work,” he said. “This may seem boring to some, but our first thing with the mortgage bond market is to do no harm. We’ve got to get this right. And we believe we have. These new pricing grids make sure that both VantageScore and classic FICO-scored loans are priced on a level playing field, accurately reflecting the risk weighting of the respective models.”
He said he was encouraged that FICO might be willing to match VantageScore in price per loan with its 10T scoring model.
“VantageScore was at about $5 per loan, and they went down to 99 cents a loan,” Pulte said. “FICO had taken their prices from $4.95 up to $10. And the FICO CEO has offered to — pending details of a FICO Direct program — take the FICO score from $10 down to 99 cents with a success fee. So, massive win for the American people if we can get that done with FICO. But either way, it’s a massive win for VantageScore, and we’ll see if we can get something done with FICO.
“But I appreciate the CEO of FICO being willing to look at the 99-cent score. I know it’s maybe not necessarily the smart business decision for him today, but I think it’s the best business decision for him in the long term, and that’s obviously up for him to figure out.”
HUD acceptance, LLPA changes, Fannie/Freddie IPO
In addition to Pulte’s announcement, there were a few other notable comments to brokers.
Turner said HUD would be accepting VantageScore and FICO 10T soon. He said in a follow-up that he didn’t yet have a solid timeline for when they would be accepted.
“Today’s announcement is an important step in this administration’s work to bring affordable homeownership back into reach for Americans across our great country,” Turner said. “And I want to emphasize that this will benefit only applicants who are creditworthy and trustworthy. We’ve been through a great financial crisis. We understand that. The rigor will stay in place, but we want to make it more available and more affordable.”
Pulte was also asked about reducing loan-level price adjustments (LLPAs), something that the National Association of Mortgage Brokers has been pushing for to make housing more affordable. Pulte said no decision on that had been made.
“Are we going to effectively lower the costs of mortgages through changing the LLPAs?” Pulte said. “And my answer there is still to stay tuned. We haven’t made any decisions there yet.”
He was also asked about the timeline for a potential IPO for Fannie and Freddie, an issue that had largely disappeared from the headlines in recent months. He deferred to President Donald Trump for any decisions on that issue.
“There’s only one gentleman who knows the status of the IPO, and his name is President Donald J. Trump,” Pulte said. “And so I would defer to him on the timing, but I would say this — and Secretary Turner knows this — we stand ready every day to execute the president’s vision. And if and when he decides he wants to do something, we are locked and loaded and ready to go.”
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