Weekly Real Estate News
Summary
Rocket Mortgage plans to default to VantageScore 4.0 for eligible direct-to-consumer mortgages in Q4 after testing 1.4 million credit reports. Rocket says customers who saved money with VantageScore saved an average $1,600 at closing.
Rocket Mortgage plans to make VantageScore 4.0 its preferred credit scoring model for eligible direct-to-consumer mortgages during the fourth quarter, moving one of the nation’s largest mortgage operations from testing the model to making it the default where loan programs allow it.
The Detroit-based lender said it reached the decision after roughly four months of testing and obtaining 1.4 million credit reports using both VantageScore and FICO this year. Rocket said the comparison showed that VantageScore helped more clients meet credit requirements and, for borrowers who saved money using the model, produced average savings of $1,600 at closing.
Those results are Rocket’s own findings and should not be read as an industry-wide measure of savings or qualification outcomes. But the decision is significant because it puts a large-volume lender behind the credit-score competition that federal housing regulators have been advancing this year.
Rocket will default to VantageScore where the loan allows it
Rocket said the transition will apply during the fourth quarter to direct-to-consumer mortgages that can be delivered to Fannie Mae and Freddie Mac, VA home loans and other eligible products.
The change is not universal. Rocket said investment-property and second-home mortgages, home equity loans, FHA loans, jumbo loans and certain other products will continue using FICO scores for now. Rocket Pro, its mortgage-broker channel, will provide both VantageScore and FICO to brokers rather than impose the same default.
Credit scores also remain only one part of mortgage underwriting. Income, debt, assets, property characteristics and program-specific requirements still factor into approval.
Fannie and Freddie opened VantageScore to all approved lenders this month
The timing follows a major change at the government-sponsored enterprises. On Sept. 9, the Federal Housing Finance Agency said Fannie Mae and Freddie Mac had expanded VantageScore 4.0 availability to all approved lenders, eliminating the prior requirement for written approval.
Under the current framework, lenders may use either Classic FICO or VantageScore 4.0 on eligible loans sold to the enterprises. FHFA says FICO Score 10T is not currently eligible for delivery and that additional guidance will come when it becomes available.
Fannie Mae’s Sept. 9 lender guidance likewise confirms that VantageScore 4.0 is broadly available to all of its approved lenders. That shift created the operational opening for lenders to decide whether the newer model would remain an alternative or become part of their standard workflow.
Rocket says the newer model expanded access for some borrowers
VantageScore 4.0 evaluates changes in a consumer’s credit behavior over time and can incorporate rent and utility payment information when those data are present in a credit file. Rocket said that gave it additional information for some prospective borrowers with limited conventional credit histories.
“Competition is healthy, especially when it can lower costs and expand responsible access to homeownership,” Rocket Mortgage CEO Jay Bray said in announcing the move. Rocket said its testing found some clients who would not otherwise have been served could move forward under VantageScore, while some qualified for better pricing.
The $1,600 average savings figure applies specifically to Rocket customers who saved money with VantageScore during the company’s testing. Rocket did not say in the announcement what percentage of the 1.4 million reports resulted in a different qualification decision or lower closing costs, making it difficult to extrapolate the result across its broader mortgage production.
A competitive decision other lenders will be watching
For mortgage executives, the important development is that credit-score competition is moving from federal policy into lender-level operating decisions. FHFA has given approved enterprise lenders the option to use VantageScore 4.0, but it has not required them to abandon Classic FICO.
Rocket is now choosing a default for its eligible direct channel. That could give other large lenders a real-world comparison point as they evaluate pricing, borrower eligibility, operational changes and investor execution under the two scoring models.
It also raises practical questions for originators. A borrower’s score and loan economics can vary depending on the model being used, while product eligibility remains uneven. Loan officers will need to understand not only a borrower’s reported score but which scoring model applies to the particular loan and channel.
Rocket’s move does not settle the mortgage industry’s long-running credit-score debate. It does, however, mark a shift from whether lenders can use VantageScore 4.0 on enterprise-eligible mortgages to how aggressively major lenders will choose to use it.
Rocket said it will continue evaluating additional scoring options as they become available.
