Why Haven’t Loan Officers Been Told These Facts?
VA Gives Greenlight to VantageScore 4.0
If you need to get up to speed on the FNMA/FHLMC transition to VantageScore 4.0 and FICO 10 T, and what these new score models entail, see the FNMA credit score initiative link FNMA Credit Score Initiative.
For originators, the primary advantage of VantageScore 4.0 is that the newer credit score models can integrate nontraditional tradelines into the score model. This score model improvement intends to expand mortgage credit access and automated underwriting (AUS) for persons with more marginal credit histories, thin files (limited or stale traditional credit), or no traditional credit lines currently relegated to manual underwriting. Generally, AUS affords superior credit opportunities relative to manual underwriting.
Self-Reporting
The term “self-reporting” sometimes describes the consumer’s ability to add nontraditional tradelines to their traditional credit report by facilitating the flow of payment data to the national consumer reporting agencies (NCRAs). Thus, self-reporting does, in theory, enable the consumer to establish a traditional credit score or boost their existing score by adding favorable nontraditional tradelines.
Mortgage Industry Behind the Times
The mortgage industry is lagging in expanding credit opportunities through technology. For example, the credit score models currently used by the mortgage industry cannot assess nontraditional tradelines. All the self-reporting and landlord VORs are of no avail in rendering more accurate and, therefore, better credit scores, particularly for under-banked communities. This is why the GSEs will make using the newer score models (FICO 10T and VantageScore 4.0) mandatory in 2025 (or so the plan is).
VantageScore Announcement – VA Greenlights Use of VantageScore 4.0
VantageScore, a leading national credit scoring company, announced today that the U.S. Veterans Administration accepts mortgage loans using the VantageScore 4.0 credit scoring model. VantageScore 4.0 scores approximately 2.5 million more veterans and service members than conventional models, broadening homeownership opportunities for U.S. military personnel and their families.
Military service members often face challenges accessing credit during or after deployments. This happens because many traditional credit models exclude consumers who have been credit dormant for six months. This makes it difficult for both recently discharged and active-duty service members to obtain a credit score. VantageScore 4.0 eliminates the requirement for recent credit activity in the past six months. It also integrates rental payments and other consumer credit data into its scoring model, making it more inclusive than conventional models.
“Outdated credit scoring models unfairly exclude many veterans from fair pricing in the financial marketplace,” said Tony Hutchinson, SVP of Industry and Government Relations at VantageScore. “VantageScore enables more veterans and active-duty military to access the financial products they need, including home loans.”
VA direct and VA-backed Veterans home loans offer favorable terms for buying, building, improving, or refinancing homes, contingent upon a credit score. Historically, outdated credit models excluded millions of eligible borrowers. VantageScore 4.0 scores approximately 33 million more individuals who may now gain access to credit scores, fostering homeownership potential.
With the economy poised for improvement and interest rates expected to decline in the coming months and into 2025, transitioning to the VantageScore 4.0 credit scoring model now will position lenders to take advantage of opportunities in the mortgage marketplace instead of missing out on them. By implementing VantageScore 4.0, lenders could originate as many as 2.7 million new mortgages or up to $1 trillion in new high-quality mortgage loans. This opportunity, along with VantageScore 4.0’s proven predictive power, has drawn interest and support from many prominent lending institutions.
Bank Testimony
“BMO Bank is a purpose-driven organization that is focused on leveling the playing field in underserved communities and creating the conditions for inclusive economic growth,” said Mark Shulman, Head of Consumer Lending, BMO Bank. “VantageScore has provided us with the opportunity to provide fair and accurate credit scores to a broader population, and we look forward to leveraging VantageScore for mortgage lending in the future to help further close the housing gap.”
CapitalOne Self-Reporting Article
American Express Self-Reporting Article
BEHIND THE SCENES – FHFA Report: House Price Index Stabilizing, Return to Normative Price Increases
U.S. House Prices Rise 4.3 Percent over the Prior Year; Up 0.7 Percent from the Second Quarter of 2024
11/26/2024
Washington, D.C. – U.S. house prices rose 4.3 percent between the third quarter of 2023 and the third quarter of 2024, according to the Federal Housing Finance Agency (FHFA) House Price Index (FHFA HPI®). House prices were up 0.7 percent compared to the second quarter of 2024. FHFA’s seasonally adjusted monthly index for September was up 0.7 percent from August.
“U.S. house price growth slowed in the third quarter, continuing a trend that started in the fourth quarter of the previous year,” said Dr. Anju Vajja, Deputy Director for FHFA’s Division of Research and Statistics. “While house prices continued to increase because housing demand outpaced the locked-in housing supply, elevated house prices and mortgage rates likely contributed to the slowdown in price growth.”
View a highlights video at FHFA Housing Highlights Video (Approx. two minutes)
Significant Findings
- Nationally, the U.S. housing market has experienced positive annual appreciation each quarter since the start of 2012.
- House prices rose in 49 states between the third quarter of 2023 and the third quarter of 2024. The five states with the highest annual appreciation were 1) Hawaii, 10.4 percent; 2) Delaware, 8.5 percent; 3) Rhode Island, 8.4 percent; 4) Connecticut, 8.2 percent; and 5) New Jersey, 8.1 percent. House prices declined in the District of Columbia and Louisiana by 3.1 percent and 0.4 percent, respectively.
- House prices rose in 91 of the 100 largest metropolitan areas over the previous four quarters. The annual price increase was the greatest in Miami-Miami Beach-Kendall, FL at 10.8 percent. The metropolitan area that experienced the most significant price decline was North Port-Sarasota-Bradenton, FL at 6.4 percent.
- All nine census divisions had positive house price changes year-over-year. The East North Central division recorded the strongest appreciation, posting a 6.8 percent increase from the third quarter of 2023 to the third quarter of 2024. The West South Central division recorded the smallest four-quarter appreciation, at 1.6 percent.
- Trends in the Top 100 Metropolitan Statistical Areas are available in our interactive dashboard: https://www.fhfa.gov/data/dashboard/fhfa-hpi-top-100-metro-area-rankings. The first tab displays rankings, and the second tab offers charts.
The FHFA HPI is a comprehensive collection of publicly available house price indexes that measure changes in single-family home values based on data that extend back to the mid-1970s from all 50 states and over 400 American cities. It incorporates tens of millions of home sales and offers insights about house price changes at the national, census division, state, metro area, county, ZIP code, and census tract levels. FHFA uses a fully transparent methodology based upon a weighted, repeat-sales statistical technique to analyze house price transaction data.
FHFA releases HPI data and reports quarterly and monthly. The flagship FHFA HPI uses seasonally adjusted, purchase-only data from Fannie Mae and Freddie Mac. Additional indexes use other data including refinances, mortgages insured by the Federal Housing Administration, and real property records. All the indexes (including their historic values) and information about future HPI release dates are available on FHFA’s website: https://www.fhfa.gov/HPI.
Tip of the Week – Join The Loan Officer School for 2024 CE
Join us for 2024 continuing education classes.
- Learn about using Asset Verification Reports for VOR in AUS.
- Learn to expand deal-making capacity with available technology.
- Learn to avoid critical errors in the coming Bi-Merge credit change.
- Learn to convert prospects without scoreable credit records or traditional credit tradelines into AUS slam-dunks.
- Discover what you must know about trended data and the FNMA/FHLMC required credit score changes.
If you need to attend any state-required CE, please call today! (866) 314-7586
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