Mortgage
CrossCountry Finds $2,500 in Savings With VantageScore While Rivals Sign FICO Deals
By Real Estate Wire Staff, . Real Estate Wire.
National Mortgage News reported Friday that CrossCountry Mortgage ran a 60-day test of VantageScore 4.0 and found it generated an average of $2,500 in savings on certain loans, a figure that puts a dollar amount on what had until now been a largely theoretical argument for adopting the newer credit model. HousingWire also covered the announcement.
What CrossCountry found
Brian Clark, CrossCountry's director of product and pricing, said the result shows "how additional flexibility can translate into meaningful benefits for our customers," according to a press release cited by National Mortgage News. The company framed the savings as part of a broader push to make fuller use of government-related market options, and said it is also removing an 80% loan-to-value ratio cap it had applied as an overlay on Fannie Mae and Freddie Mac loans, and expanding borrower access to Department of Veterans Affairs-guaranteed loans.
The savings are tied directly to a Federal Housing Finance Agency decision to unify loan-level pricing for VantageScore 4.0 with FICO's long-standing standard, eliminating an adjustment that had previously made VantageScore loans more expensive to deliver into the GSE market. CrossCountry acknowledged the model is not yet accepted across all programs, saying the approach "gives loan officers more flexibility" in the meantime.
Rocket Mortgage's chief executive Jay Bray, speaking at the Housing Finance Strategies conference this week, said a five-month test across 1.4 million customers showed similar results. "We saw higher approval. We saw customers being able to save money, and so we made the choice to move in that direction for certain pieces of our portfolio," Bray told conference listeners, in remarks broadcast online by Housing Finance Strategies.
Why rivals went the other way
Fairway, Movement and Rate announced on the same day that they have committed to FICO's bundled pricing, which locks in a price freeze in exchange for the commitment.
The competing announcements reflect a market that has not yet settled. VantageScore 4.0 and the newer FICO 10T score, both slated for broader GSE adoption, differ from the classic FICO model in that they incorporate payment history over time rather than a single snapshot of a borrower's obligations. Until acceptance is universal across all loan programs, lenders appear to be hedging.
The regulatory concern
Not everyone is comfortable with where this is heading. Sandra Thompson, who served as director of the Federal Housing Finance Agency before leaving the role, raised a pointed objection at the Housing Finance Strategies conference. "The most important aspect of credit modernization is getting the risk pricing of the loans done correctly," she said. "A 740 classic FICO isn't necessarily the same risk as a 740 VantageScore loan."
Thompson added that the implications for capital and for mortgage insurers deserve more scrutiny before the two scores are treated as pricing equivalents. Alanna McCargo, who previously led Ginnie Mae and later the Federal Home Loan Bank of San Francisco, echoed the concern. "I just think we need to be very careful as this rolls out," McCargo said at the same conference.
The practical tension here is real. Unified pricing creates a financial incentive to route loans through whichever score produces the better outcome for a given borrower, which is exactly what CrossCountry and Rocket say they are doing. Whether the GSEs' pricing fully accounts for the risk difference between the two models is the question Thompson and McCargo are pressing, and it is one the industry has not yet answered with hard data.
Sources
1. CCM's VantageScore test saves $2,500; rivals lock FICO deals, nationalmortgagenews.com
2. CrossCountry reports $2500 savings with VantageScore 4.0, housingwire.com
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