[Alice] Now off to our next segment, which normally is me. So I’m gonna talk a little bit here on the vantage score. Many of you heard that Bill Pulte, the head of FHFA, tweeted, I’m still struggling with mortgage policy coming out in tweets, or acts or social media posts. For me, I like a good solid memo that’s going to tell me everything that went on. So to get a simple sentence that says, Hey, effective immediately, you can use a Vantage Score and as Adam DeSanctis reported in the MBA report, he used the word numerous. And, he said that twice that’s an understatement. There are an incredible number of things that have to happen before we could actually have a Vantage Score that’s functioning efficiently, really from a technology standpoint and in a way that would actually help benefit consumers through the automated underwriting systems. So there’s a lot to work out and hopefully I haven’t seen MBA’s list, so I’m gonna check that out now that he mentioned it’s available. So those of you who are listening, make sure you check that out. Also, to really understand what would the benefit be of adding a Vantage Score. They really do have a little bit of an edge. They’ll make that case, the Vantage Score Company, we’ve had them on the program years ago when they first came out. They’ve been around for a really long time. Done a great job of expanding the scores to be a little more flexible with things like collection accounts and really how you’re paying your credit each and every month. So I’d like to get the group’s thought on using a Vantage Score, implementing this. What have you heard? Have you heard anybody who’s going Yeah, because of the announcement the other day last week. I’m gonna jump on this right now and start using it. And just to clarify the timelines for those of you who are going, I thought this was already announced. It technically was put in memos that Fannie and Freddie do need to move forward with the Vantage Score. And then in May there was a social media communication about the fact that they were approved to move forward and then there was this social media that was basically saying, yes, we’re going now. So yes, there’s authority, but I don’t know if we have the technology in place to, I’m gonna say we don’t have all the technology in place.
[Allen] Hey, Alice, if you don’t mind, yeah, so I was gonna talk about this in my segment at the end of the news. Why don’t I just pop it out right now? It’s just a couple bullets and it talks about exactly what you brought up. So one is the Vantage score, 4.0 is being greenlit for GSE use as you mentioned. And it’s not just a credit score update, it’s a full tech ecosystem lift. So, everyone, what you just said, Alice, everybody needs to keep that in mind. Lender, LOS and AUS platforms must all support what’s called dual scoring processes, FICO, and Vantage during the transition. Not all systems ready as you can all imagine. Vantage Score 4.0 uses AI. So keep that in mind. It’s an with alternative data. So Alice, you mentioned a few. It also includes rent and utility payments. So it requires new data pipes, new analytics, and recalibrated risk models. So everyone that’s involved in a mortgage transaction from the very front of the transaction to the back of the transaction, even in the whole loan market, everybody is affected. Everyone will take on their own version of risk. But that dual system that I just mentioned is really critical to remember. And yes, Vantage Score 4.0 does use AI. The secondary market and risk teams. They also, as I just mentioned, they have to upgrade their pricing models, eligibility thresholds. It touches capital markets. The tech vendors have to integrate not only to the Vantage score APIs if they’re not already, but they have to rethink dashboards. They have to rethink how they’re gonna support compliance logic reporting. What does the transition look like? And in addition to that, it’s not just plug and play, right? So your tech stack, if you have your own tech stack and you’ve been building, it’s hard coded for fico. So you’re gonna have to think about your shift. Your vendors need to put a timeline out there. But you also have to keep in mind if you’re pushing a lot of shopping carts, right? and you think that you can push three shopping carts because it was a big day at Costco and you’re pushing everything to your car, one of those carts may have something that’s gonna slip right off the top, right? which cart do you push first and do you pull them backwards or forwards? You have to consider that with the technology. Do you have one vendor that’s ready? Your other vendors may not be ready yet. You can’t just throw one card ahead of the other. So you need to consider what is the alignment. You need to have the right technology staff, or the right management to help align your vendors, your vendors are gonna send you notifications. You’re gonna have to get on the phone with your vendors. You’re gonna have to talk to your vendors. There’s work to be done, but I just want to tell you what the timeline is, Alice, that you just mentioned, that the agencies have put out, so FHFA announced VantageScore 4.0 will be required for GSE loan eligibility, but the rollout is gonna be what they call gradual. The dual score model. FICO plus Vantage Score will be required starting in quarter four of 2025. Okay. That’s the dual model. That’s this year. Quarter four. Lenders must submit both scores. Full transition to a buy merge report with Vantage Score 4 only is expected by 2026. Now I’m gonna put an asterisk there and then I’m gonna stop talking. The asterisk is that we’ve seen things rolled out by the agencies that get delayed because the rest of the market can’t catch up quick enough. So, I would say expect that a date will come out. The fact that they said by 2026 and not what part of 2026 means they’re not sure. So keep that in mind. But it’s time to start preparing and organizing.
[Alice] And Allen, that was a great update by the way. And the salespeople hear that and they hear more borrowers would be eligible that the score is friendlier. And so instantly on the sales side they’re going, can I have this tomorrow? So I hope everybody took notes on what you were just describing because it is such a lift. And I wrote down the term that you said data pipes because that was the first thing I’m thinking. I think this is so granular, we don’t even have the fields on our screens to hold this data to even begin to apply it for within the tech stack. That’s right. And I wanna add one more. That’s true vendor to this list and that’s the PMI companies, right? Where do they stand with this? So Allen, have you heard from any of the tech providers specifically on have they had comments about this since that message last week?
[Allen] I have not heard anything. No.
[Alice] Okay. What do you think, bill?
[Bill] So would. Either of you like a copy of the enterprise credit score and credit report initiative Playbook from March of 2023 that talked about this being done and completed by fourth quarter of 2025. This initiative has been out there for a while and yes, I had the luxury or misfortune, I’m not sure which of participating in a lot of the a Q&A sessions. And early on the betting pool was being overly influenced by 27s and 28s. And this was two years ago. There’s a ton of work to be done. And, as you started in the beginning, Alex just because the tweet comes down doesn’t make it happen, and the challenge in every organization is to be able to explain to the sales folks that effective immediately does not mean effective immediately and the other glaring piece that I’m waiting to see addressed is how is HUD gonna look at this for FHA, right? Because that was always the big challenge in the previous initiative. And, lots of lenders were more aggressive than whining, but, it is a family podcast about HUD not being on board and FHFA’s response then was you, the lenders need to go deal with HUD. Can you guys go across the street and talk to each other?
[Alice] No, we don’t talk over there.
[Bill] So I think in this, that’s, to me, that would be the first thing that has to be addressed because otherwise you’re not just building a new set of pipes to replace what you have. You’re having to build pipes that are gonna run in parallel to what exists, for government laws. That makes no sense whatsoever.
[Allen] Bill, if I can just throw in something funny. The way we get those two organizations to talk to each other is we put a food truck right between the front of those buildings and we put free ice cream. And we see who comes out and we make them talk.
[Alice] I like that Alan.
[Bill] So Allen, should we start a GoFundMe for the ice cream food truck?
[Alice] I think it’s a great idea. Maybe fifa, some leftover money from the building.
[Kittle] I’ll just add this. I first met Barrett Burns whose Vantage Score was his brainchild when I walked off the stage going in as chairman in 2008 at the MBA Annual. Great guy. I’ve been a supporter of Barry since retired. And vantage score since day one, just because of the different way it looked at credit. It allowed people to take into consideration their rents, which have always been, and utility bills. And they actually had data over the years that it would’ve opened the door for another 30 million potential home buyers. Over the last few years. So it was something, it actually got FICO off of its Fannie to change a lot, make a lot of the changes that they have made over the last few years that they would’ve never even looked at because they didn’t have to. So competition was really good for the industry to Bill’s and especially to Allen’s points. This is for me Pulte drawing his six gun and just start shooting everywhere from the hip because he didn’t think through any of this, because loan originators will actually do what has been already been described on here today, and they’re gonna want to have it tomorrow and none of this stuff is ready. Probably it was an irresponsible tweet or text or email, however he put it out without thinking. And I think Mr. Pulte needs to listen to this group of old guard people on here a little more closely and maybe he should listen to our podcast and consult us before he goes out and makes statements like this.
[Alice] For those of you who aren’t in this and haven’t worked with credit reports on a day-to-day basis, this is structural. It’s not just, oh, run a credit report. But the credit report is the guts of a lending decision. Obviously there are a lot of other pieces and parts to it, but all things seem to begin and end add application with run the credit report, where am I from the very beginning of the process. And so it is foundational in the loan decision, in the interest rate that borrowers obtain in the loan to values that are available to them, in the investors that are available to them and so we have to have the infrastructure to get it right in the first place. Otherwise it’s a real disservice to the customer. So do we want all the flexibility as an industry? Absolutely. Who doesn’t want more business, right? on the surface you go, yeah, give me Vantage Score. I think that’s a great idea. I would love to be able to potentially get a couple more borrowers in, especially for those who are feeling some of the volume pinch without the refis these days, but it’s got a lot of work ahead of it. So thank you Allen, for pointing out where we are in the timeline. Thank you, bill, for reminding us of the anticipated timelines and the report that everyone can go look up. Any final thoughts, Allen?
[Allen] No, I think we’ve done a good job of scaring everyone away. No, I’m just kidding.
[Alice] We don’t wanna scare them. I think we just want them to be aware. So as a loan officer who might you hear using a Vantage Score? Maybe it’s a portfolio lender, a credit union community banks who aren’t selling their loans to the agencies who are a little more manual process. Is it worth trying to start testing to see what the impact was and I’m gonna have to go look that up because I believe they ran some reports not too long ago that did that. There are reports out there that do a comparison of customer profiles. But again, your profile will be different from anything that’s published nationally. So, definitely worth learning about. So you can talk about it with your customers. That’s the other thing that’s going on right now is now that news has been out there for customers, they’re all looking around going, what is a Vantage Score? And you’ll wanna be prepared to make sure that you can talk about it. So, there’s good stuff on the Vantage score website. Make sure you get your information straight from them because that’s always good to get it straight from the source.
[Allen] Hey Alice? Yes? Just I wanna throw something out there and I’m curious of our team’s opinion here. If there’s any originators listening and they’re not tech savvy and don’t understand everything we just mentioned, I think we should say be careful in having borrowers that you’re talking to and assuming that in a month, you’ll be able to get them the Vantage Score approval because it’s more than just the technology being enabled. The investors that are supplying the loans and the rates, they have to build Vantage Score into their models in addition. So even if you can pull a Vantage Score through your credit report provider, even if it’s manual, not through your LOS, it doesn’t mean you’re gonna be able to find a rate that’s gonna accept the Vantage Score. So we have to be careful, not upset our pipelines and assume as originators that the Vantage Score is gonna just open your pipeline and you can push people down the road if they’re not ready to make a decision.
[Alice] And we haven’t even mentioned the warehouse banks yet, right? The entire chain throughout the business process relies on a credit score. And so making sure everyone’s on the same page with agreeing to which score, what’s the process to go through? Do I always just get to use the higher one?
[Bill] The only thing in that cautionary tone that I would also remind folks from a development and testing cycle that there are parts of this that have to be sequential. So everybody can’t go off and start working on it on their own. Some development, and certainly testing is gonna depend on other components. Already been developed and tested and goes back to the media is probably way of an exaggeration.
[Alice] Yeah. And there’s always compliance. We haven’t brought them up in a while. Making sure your fee structure’s right. What are my fees going to be? and fair lending in the end of the day, making sure I’m applying the credit, the two different options consistently and fairly. All right, for those of you who don’t know, giving us all those details in there was Allen Pollack, he’s COO consultant and tech ex tech expert. So Allen, thank you so much for giving us all that information. You can reach Allen@tmsadvisors.com. Thank you so much. David Kittle and Bill Corbett and Mark Helm who had to drop, he had another event to go to today. So thank you all for your participation today and giving us all such great news. That’s it for this week everyone. Thank you so much for joining us today, and we look forward to having you on the show listening in next week. Have a great day.
Alice Alvey, Master CMB
She handles development of their World Class Training program designed to support UHM partners and organizational effectiveness.
Prior to UHM, Alice served as Senior Vice President at Indecomm leading the Indecomm-Mortgage U division, Internal QA and Compliance and SaaS technologies. Indecomm acquired Mortgage U in 2013, where Alice was President/Co-founder, providing training and consulting since 1996. Prior to MU she served as SVP of Operations at a national bank overseeing operations for wholesale, retail and correspondent from underwriting through servicing, and compliance.
She has been in the trenches of mortgage lending operations from application through servicing for over 30 years. Her authoring work in training content, policies and procedures and the FHA/VA Practical guides illustrates her ability to bridge regulatory requirements with day-to-day operations.
Alice has been a weekly contributor to the Lykken on Lending show since its beginning in April 2009 and has made her weekly contributions to 450+ episodes!