Fannie Mae announced operational changes that will pave the way for lenders to opt for use of advanced credit scoring models later this year. This shift potentially allows them to reach and approve an expanded group of borrowers through the use of trended repayment data.

The government-sponsored enterprise is preparing its web-based PoolTalk technology and files related to mortgage-backed securities and excess servicing fee disclosures for the VantageScore 4.0 option announced in July.

Fannie plans to update disclosure files in November with fields that are either new or renamed to allow for sellers and servicers to opt for use of the more modernized VantageScore 4.0 or the pre-existing Classic FICO metric with trimerged credit reports. 

The updates for PoolTalk disclosures and files related to metrics like issuance, monthly loan-level information, security and supplemental data are on track to become effective Nov. 17.

After implementation, score fields will categorize a lack of information or numbers outside the existing score range of 300-850 as not available with a 9999 code. Loan in securities issued before December will list the VantageScore 4.0 data as not applicable with a 7777 code.

As with Classic FICO, securities issued before May 1996 won’t have any reported value in the VantageScore 4.0 field.

Where broader credit score updates stand

FICO also has an advanced credit score called 10T that Fannie and its counterparty, Freddie Mac, will move forward with adopting at some point, according to a list of answers to frequently asked questions their regulator issued on credit score modernization.

FICO 10T “remains an approved credit score model and is planned for future use by the enterprises. Until then, lenders may choose between Classic FICO or VantageScore 4.0,” the regulator formerly known as the Federal Housing Finance Agency said.

Director Bill Pulte has rebranded the FHFA as U.S. Federal Housing, and has been highlighting in particular VantageScore 4.0’s ability to assess borrowers based on their rent payment track records. Traditional scores like Classic FICO look more narrowly at consumer debt obligations.

Scores like 4.0 and 10T also aim to improve on traditional credit scoring in other ways, such as examining trended data that shows how consumers pay over time rather than simply assessing a snapshot of how they handle their obligations at a recent point in time.

Differences between the two models include VantageScore’s greater comfort with scoring borrowers for the first time more immediately than FICO 10T. Consumers get higher scores for having a history managing their obligations as tracked by three credit bureaus reliably.

Fannie, Freddie and their regulator also have considered allowing an option for lenders selling loans to assess borrowers based on fewer than the traditional three trimerged credit reports, but there have been mixed findings around whether this would hurt the quality of assessments.

Score modernization is a legislative mandate from Pres. Trump’s first term.

Self-reporting of rent is growing, according to TransUnion’s recent study. TransUnion is one of the three major credit bureaus.

Still the credit bureaus’ addition of rent information to a consumer’s file is a work in progress.