Here’s an interesting credit note I saw in National Mortgage News…
The government-sponsored enterprises, facing pressure to end their reliance on old credit-scoring models from Fair Isaac Corp., are working with their regulator to study newer alternatives. Fannie Mae and Freddie Mac confirmed the commitments recently.
They are a victory for VantageScore Solutions, an upstart competitor to FICO that has struggled to gain a foothold in the residential origination business. VantageScore contends that the question of which credit-scoring models get a seal of approval from Fannie and Freddie is more than a run-of-the-mill business dispute, because it has implications for the availability of U.S. credit.
Switching to newer models would allow more prospective borrowers to be scored and provide better accuracy about the likelihood of default, VantageScore argues. At a time when many believe that home loans have become too hard to obtain, those arguments have won allies on Capitol Hill, in fair-housing circles and in the lending industry.
“Lenders will say to us that they’re being forced to use old models,” said Barrett Burns, VantageScore’s president and chief executive officer. “They want the most accurate model they can get so they can reduce the probability of default.” VantageScore has been pushing hard to get the imprimatur of Fannie and Freddie, partly because of the weight the two companies carry throughout the entire residential loan business.
That’s it for today!
Have a good day today! …and thanks for reading.
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