Weekly Real Estate News
Summary
UWM will now obtain both FICO and VantageScore 4.0 on every credit pull and automatically use the strongest qualifying score, shifting its dual-score strategy from broker comparison to automatic loan-level selection.
United Wholesale Mortgage will now obtain both FICO and VantageScore 4.0 on every credit pull and automatically use the strongest qualifying score for the borrower, moving beyond simply giving brokers access to both models.
The Pontiac, Michigan-based wholesale lender announced the change Tuesday, saying its system will compare the scores and default to the result that produces the best eligible outcome. UWM says the approach can lower a borrower’s payment, mortgage-insurance cost and other loan fees when the alternative score changes eligibility or pricing.
The distinction matters for mortgage brokers. UWM began providing both FICO and VantageScore on conventional credit reports earlier this year. Brokers could compare the models and determine which one worked better for a file. Under the new process, UWM says that comparison will happen automatically on every credit pull.
“Our goal is simple: put borrowers in the best possible position while making it easier for brokers to do business,” UWM President and CEO Mat Ishbia said in the announcement. “No one should have to worry about which credit model wins.”
UWM did not publish a portfolio-wide estimate of average savings from the new automatic-selection process. The company said its early research indicates that pulling all available scores could save some borrowers thousands of dollars over the life of a loan. That is a company estimate, not an independently verified savings figure, and the result will depend on the individual borrower, loan program and pricing.
A material change from UWM’s earlier VantageScore rollout
The move is the latest step in a rapid shift in mortgage credit scoring this year. WRE News reported Sept. 17 that UWM said roughly one in four borrowers evaluated through VantageScore 4.0 was receiving a more favorable credit result than under Classic FICO. Those outcomes included lower loan-level price adjustments, reduced mortgage-insurance costs and, in some cases, a change in loan eligibility.
UWM’s own second-quarter results show how quickly it adopted the alternative model. The company reported $502 million of VantageScore mortgage originations through June 30 and said that represented 87% of industry VantageScore loan volume at the time.
There has also been an important pricing change since UWM’s September borrower analysis. UWM eliminated the 20-point adjustment it had been applying to VantageScore for new locks effective Sept. 30, according to National Mortgage Professional. Fannie Mae and Freddie Mac simultaneously moved to aligned loan-level pricing across VantageScore and Classic FICO.
Those changes make a direct comparison between the two scoring models more consequential for borrowers near pricing, mortgage-insurance or eligibility thresholds. A higher score does not guarantee a better mortgage outcome on every file, and the score still must satisfy the requirements of the applicable loan program.
Credit-score competition is accelerating
The UWM announcement comes less than two weeks after Rocket Mortgage said it would make VantageScore 4.0 its preferred credit model for eligible direct-to-consumer loans beginning in the fourth quarter. Rocket said it reached that decision after testing 1.4 million credit reports using both scoring models.
Pennymac followed with a broader deployment. WRE News reported Oct. 5 that Pennymac had made VantageScore 4.0 available across its consumer-direct, broker-direct and correspondent channels.
The industry changes follow the Federal Housing Finance Agency’s decision to allow Fannie Mae- and Freddie Mac-approved lenders to use VantageScore 4.0 for eligible mortgages. FHFA subsequently moved the enterprises toward a single loan-level price-adjustment framework rather than maintaining separate pricing grids based on which approved score a lender uses.
UWM’s strategy differs from lenders that are moving toward one preferred score. Rather than choosing FICO or VantageScore as the default model across eligible production, UWM says it will obtain both and let the loan-level result determine which qualifying score is used.
That approach also preserves a role for FICO at a time when its position in mortgage lending is facing its most significant competitive challenge in years. FICO separately said Tuesday that UWM had reaffirmed its commitment to using FICO scores on all credit pulls. The statements are not contradictory: UWM’s announced policy is to pull FICO and VantageScore 4.0, then use the strongest qualifying result.
For brokers, the immediate operational change is straightforward. They no longer need to decide at the outset which of the two models is more likely to produce the better eligible result on a UWM file. UWM says its system will make that comparison automatically.
