New credit score pricing grids point to higher borrower costs, report shows

Fannie Mae and Freddie Mac have published official pricing grids for single-family mortgages using the traditional Classic FICO and new VantageScore 4.0 models. Early analyses suggest the new credit score model could result in higher borrower costs in many scenarios. The updates, released Wednesday as the Federal Housing Finance Agency (FHFA) opened delivery of VantageScore 4.0 loans to all lenders, formalize a temporary workaround used in a limited rollout: Price adjustments designed for FICO are applied to VantageScore 4.0 at 20 points higher. The top purchase tier for FICO remains 780 and above, which now aligns with an 800-plus VantageScore bucket. According to sources at the government-sponsored enterprises (GSEs), they expect competition between VantageScore and FICO to reduce credit report and borrowing costs over time while making mortgages available for “credit invisible” borrowers by considering rent payments and trended data in new models. The sources added that they’ve noticed VantageScore scores are higher than FICO scores, leading to lower loan-level price adjustments (LLPAs) and costs for borrowers. So far, however, only a small share of loans delivered to the GSEs u...