Newly released documents from a Freedom of Information Act (FOIA) filing by the Housing Policy Council show that in 2022, Fannie Mae and Freddie Mac were resistant to adding VantageScore 4.0 and skeptical about shifting to a single credit report (because it is less predictive of creditworthiness than requiring two or three).
PPI has long argued that competition in credit scoring is a good thing. But because VantageScore is owned by the three credit reporting agencies, there is potential for a conflict of interest, and these agencies could use their collective influence to the use of a less accurate credit score.
The FOIA requested documents highlight that Fannie and Freddie recommended that the Federal Housing Finance Agency (FHFA) only approve FICO 10T for use. They also asked that three other FICO scores, as well as VantageScore 4.0, be rejected. Furthermore, the documents indicate that Fannie Mae and Freddie Mac reported that a single-file report was less accurate than a tri- or bi- merge report.
Despite these objections, President Biden’s director of the FFHA chose to ignore the GSE’s recommendation. The Trump administration temporarily halted the rule, but after a delay, FHFA Director Bill Pulte pushed forward with a plan that also contradicts the GSE’s advice — to allow VantageScore 4.0 as an approved model for Fannie Mae and Freddie Mac loans.
If true, the FHFA’s decision is reckless and potentially costly to consumers and should therefore be revisited by the agency. Furthermore, Congress should hold hearings on why the agency would ignore Fannie and Freddie’s warnings.
