Beginning in the fourth quarter of 2025, a VantageScore 4.0 credit score will be required for use for all mortgage loans funded by either Fannie Mae or Freddie Mac, which account for the majority of mortgages originated in the United States.
To help lenders plan their transition, Dr. Rikard Bandebo, EVP, Chief Strategy Officer and Chief Economist at VantageScore, recently addressed attendees in a keynote speech at the ACUMA (American Credit Union Mortgage Association) October conference, which took place at the Bellagio in Las Vegas.
Dr. Bandebo outlined the changes coming to the mortgage industry with the implementation of VantageScore 4.0 next year, along with the impact it is going to have in enabling access to homeownership to millions more Americans.
There is a bright future with the coming mortgage scoring changes at the GSEs, including the implementation of VantageScore 4.0,” shared Dr. Bandebo. “We are excited that credit unions will have so many more opportunities to provide homeownership to those who have been excluded from the current system.
As Dr. Bandebo underscored in his remarks at ACUMA, mortgage lenders who don’t sufficiently prepare to adopt VantageScore 4.0 could face challenges in the coming year. These include:
- Loss of Market Advantage: Lenders unprepared for VantageScore 4.0 risk losing market share to competitors who have adapted.
- Poorer Portfolio Performance: Without the advanced analytics of VantageScore 4.0, portfolio management may suffer.
- Increased Regulatory Scrutiny: Non-compliance with new credit scoring requirements can attract regulatory attention.
- Failure to Support Diversity: Not adopting VantageScore 4.0 undermines commitments to promote diverse homeownership.
With the FHFA, Fannie Mae, and Freddie Mac gearing up to implement VantageScore 4.0 for GSE-funded mortgages, it’s crucial for mortgage lenders to prepare their transition now. Preparing for VantageScore 4.0: A Guide for Mortgage Lenders provides an outline for lenders looking to start the implementation process.
To learn more about VantageScore’s entry into the mortgage market, visit our Mortgage page.
