In a historic move described by Federal Housing Finance Agency (FHFA) Director William Pulte as: “Today changes mortgages FOREVER,” the FHFA has announced that it will immediately implement the acceptance of VantageScore 4.0 for mortgages sold to Fannie Mae and Freddie Mac. These mortgages account for a majority of the mortgages in the U.S. The decision modernizes the mortgage government-sponsored enterprises (GSEs), ending a decades-long lack of credit score competition in the U.S. mortgage market.
“VantageScore thanks Director Pulte for his resolute focus on enacting credit score competition as required by the law, and promoting efficiency and affordability for creditworthy Americans,” said Silvio Tavares, President and CEO of VantageScore. “Under Director Pulte’s leadership, the FHFA’s long-expected decision to accept VantageScore 4.0 will revolutionize the American mortgage market and grant millions of creditworthy Americans the golden opportunity to own their homes.”
The FHFA’s announcement enforces the 2018 Credit Score Competition Act, signed into law by President Trump as part of the Economic Growth, Regulatory Relief, and Consumer Protection Act. That policy change established the use of modern credit scoring models for mortgages that would be sold to the GSEs.
“Effective today, to increase competition to the Credit Score Ecosystem and consistent with President Trump’s landslide mandate to lower costs, Fannie and Freddie will ALLOW lenders to use Vantage 4.0 Score with no current requirement to build new infrastructure (stays Tri Merge),” said Pulte in a social media post. The FHFA initially mandated Fannie Mae and Freddie Mac to accept mortgages scored by VantageScore in October 2022, giving the marketplace a three-year grace period until the fourth quarter of 2025 to implement the change. Since then, the Veterans Administration and the majority of the Federal Home Loan Banks, including those in San Francisco, New York, Chicago, Cincinnati, and Dallas, have begun accepting VantageScore 4.0.
Key benefits of the FHFA’s announcement include:
- Approximately $1 trillion in incremental mortgage activity anticipated: According to a recent VantageScore analysis, credit score competition could enable up to $1 trillion in high-quality mortgage loans. While older credit models routinely excluded millions of eligible borrowers, VantageScore 4.0 eliminates the requirement for recent credit activity, which prevented many Americans, including active and recently retired members of the armed services, from obtaining a mortgage. Additionally, VantageScore 4.0 eliminates the requirement for the consumer credit file to be older than six months, which provides previously underserved, young-to-credit Americans with newfound access to financial products.
- More creditworthy Americans to qualify for homeownership: An estimated five million Americans, including veterans and prospective buyers in rural communities, are expected to benefit from the FHFA’s implementation.
- Increased efficiency, affordability and opportunity: VantageScore 4.0’s incorporation of alternative data sources like rent, utility, and telecommunications payments results in the most predictive credit score for mortgages, according to independent research from analysts at Bank of America.
In 2018, President Trump signed the Credit Score Competition Act, ushering in a shift toward more modern credit scoring models. This legislation mandates the use of updated credit scores, including VantageScore 4.0, in mortgage lending. Senator Tim Scott (R-SC), chair of the Senate Banking Committee in the 119th Congress, was a key sponsor of the bill.
Rep. Scott Fitzgerald took to X to praise the move: “This is an excellent move by FHFA Director @pulte to enhance competition and ensure creditworthy borrowers have their full credit history considered when getting a mortgage.”
The U.S. Senate Banking Committee GOP wrote: “Today marks a huge step in increasing access to credit for homebuyers across America. @FHFA Director @pulte announced plans to implement Chairman @SenatorTimScott’s Credit Score Competition Act, which will help more credit-invisible Americans access mortgages.”
