STAMFORD, Conn.--(BUSINESS WIRE)--VantageScore Solutions, LLC, the company behind the VantageScore® credit scoring model, announced today the results of a study assessing the social and financial impact of revised credit score requirements at Fannie Mae and Freddie Mac.
“The net benefits of the GSEs and FHFA allowing lenders to use more inclusive credit assessment tools include not only expanding homeownership in a safe and sound manner but also creating a more robust and sustainable housing recovery and stronger economy for America.”
Currently, through their seller-service guidelines, Fannie Mae and Freddie Mac “lock in” models based on sample dates from the 1995 - 2000, which ultimately exclude millions of creditworthy borrowers. VantageScore Solutions’ impact assessment estimates that 72,285 creditworthy households would additionally be served annually by more inclusive scoring models if these guidelines were amended. This includes expanding mortgage access to 16 percent more Hispanic and African American households as compared with 2013 levels.
Based on conservative assumptions, the assessment reveals that this could lead to a combined annual revenue opportunity of $272 million for Fannie Mae and Freddie Mac.
The VantageScore 3.0 model is able to generate a score for 98 percent of those consumers with credit files at the three credit reporting companies, including 30-35 million consumers typically not scored by conventional models. Among those within this population, 7.6 million have credit scores of 620 or above, potentially qualifying them for a mortgage.
“The business case for allowing lenders to use updated and more inclusive credit scoring models is perhaps only matched by the impact on the many creditworthy households that are currently all but invisible to mortgage lenders,” said Mike Trapanese, senior vice president of VantageScore Solutions. “As the demographic make-up of homebuyers evolves it’s critical that the current system effectively provides access to sustainable homeownership for all creditworthy borrowers. These findings demonstrate that there is upside for the GSEs and the time to invest in the future is now.”
As part of its 2015 scorecard, the Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, has directed the government-sponsored enterprises (GSEs) to “Assess the feasibility of alternate credit score models and credit history in loan-decision models, including the operational and system implications.” This is one of several scorecard items under the category of the GSE’s objective to, “Maintain, in a safe and sound manner, credit availability and foreclosure prevention activities for new and refinanced mortgages to foster liquid, efficient, competitive, and resilient national housing finance markets.”
“Homeownership opportunities for creditworthy borrowers should not be constrained or limited by legacy scoring systems and models,” said Jim Carr, housing finance, banking and urban policy expert. “The net benefits of the GSEs and FHFA allowing lenders to use more inclusive credit assessment tools include not only expanding homeownership in a safe and sound manner but also creating a more robust and sustainable housing recovery and stronger economy for America.”
An infographic that explains study results is available on the VantageScore website.
About VantageScore Solutions
VantageScore Solutions, LLC (www.vantagescore.com) is the independently managed company that owns the intellectual property rights to the VantageScore credit scoring models, including the VantageScore 3.0 model, which provides up to 25 percent predictive improvement over earlier models and has the ability to formulate a score for 30 – 35 million previously unscoreable consumers. Initially developed by America’s three national credit reporting companies (CRCs) — Equifax, Experian and TransUnion — VantageScore Solutions’ highly predictive models use an innovative, patented and patent-pending tri-bureau scoring methodology that provides lenders and consumers with more consistent credit scores across all three national credit reporting companies. Nearly one billion VantageScore credit scores were used in 2014, by over 2,000 lenders and other industry participants, including six of the 10 largest banks.
read more: http://www.businesswire.com/news/home/20150323005105/en/Study-Adoption-Credit-Scoring-Models-Fannie-Mae#.VRAUUOGUL6k
No comments:
Post a Comment