Mortgage Banking Summit: FHFA’s unified LLPA grid for FICO, VantageScore raises investor concerns

The Federal Housing Finance Agency (FHFA)’s decision to apply the same loan-level price adjustments (LLPAs) for Classic FICO and VantageScore 4.0 loans is being viewed as a de facto incentive for VantageScore adoption — and as a source of new uncertainty around investor reactions and risk-based pricing. Industry leaders at HousingWire’s Mortgage Banking Summit in Dallas on Thursday said the move, which eliminates a prior 20-point calibration between the two credit scores, will likely accelerate use of VantageScore but leaves open questions on how mortgage-backed securities (MBS) investors will respond. “There’s some confusion about how that actually works; the immediate reaction we got from our members was this is going to take time to implement,” Bill Killmer, senior vice president for legislative and political affairs at the Mortgage Bankers Association (MBA), said on stage. On Monday, FHFA Director Bill Pulte said Fannie Mae and Freddie Mac will move to a single pricing matrix for LLPAs, rather than maintaining separate grids for Classic FICO and VantageScore 4.0. Pulte said the change follows feedback from lenders and consumers, while arguing that separate grids “makes zero sen...