On March 23, 2023, the Federal Housing Finance Agency (“FHFA”) announced that Fannie Mae and Freddie Mac (collectively, the “GSEs”) are beginning the next phase in a multiyear transition to the use of two new credit score models, FICO Score 10 T and VantageScore 4.0. The GSEs are seeking feedback from industry stakeholders in regard to implementation planning, which is discussed in the joint Enterprise Credit Score and Credit Reports Initiative Partner Playbook. The playbook contains timelines for implementation and FAQs which will periodically be updated with additional information. Stakeholders are invited to complete the industry survey which can be found on the Fannie Mae and Freddie Mac Credit Score Transition Pages.
The FHFA Validation and Approval of Credit Score Models Final Rule (12 C.F.R. Part 1254, effective October 15, 2019) provides the process the GSEs must follow to transition to new credit score models. In October 2022, the FHFA announced that two credit score models, FICO Score 10 T and VantageScore 4.0, had been validated and approved by the GSEs in accordance with the final rule. To read more, click here.
The GSEs have now established proposed milestones for the transition from the current Classic FICO three credit reports (“tri-merge”) to the two new credit reports (“bi-merge”) for single-family loan acquisitions. FHFA estimates that the bi-merge credit implementation could occur by the first quarter of 2024, while further implementation of the two new credit score models is expected to occur over two phases in 2024 and 2025:
- Phase 1, estimated to begin in the third quarter of 2024, will include delivery and disclosure of the additional credit scores.
- Phase 2, estimated to occur in the fourth quarter of 2025, will include incorporation of the new credit score models into pricing, capital, and other processes.
DocMagic will continue to provide updates as additional information becomes available as we participate in the industry feedback process with the GSEs.
To view the updated FHFA Fact Sheet on Credit Models, click here.
If you have any questions regarding this article, please contact our Compliance Department.
