WASHINGTON — Federal housing officials said lenders will now be able to consider rent payment history and other nontraditional data when evaluating mortgage applicants, a move that could make it easier for some prospective homebuyers to qualify for loans.
The change allows lenders to use the VantageScore 4.0 credit model, which incorporates rental payments, utility bills and other financial data not typically included in traditional credit scoring models dominated by FICO scores, Marketplace.org reported.
As credit union lenders are aware, to this point, for the most part would-be homebuyers could only prove their creditworthiness through FICO scores, which only borrowers’ track records on things like credit card and car loan repayments.
‘Broader View’
Scott Turner, secretary of the U.S. Department of Housing and Urban Development, said the updated approach reflects a broader view of borrower behavior.
“New models include rental history, utility payments, and other data that is not currently accounted for when applying for a home mortgage,” Turner said, according to Marketplace.org.
The VantageScore 4.0 model will be used for mortgages backed by the Federal Housing Administration as well as loans associated with Fannie Mae and Freddie Mac, which together guarantee a majority of U.S. mortgages.
AI Tools to be Used
Bill Pulte, director of the Federal Housing Finance Agency, said artificial intelligence tools will be used to help assess borrower risk under the expanded model.
“And so, we feel very confident that this hasn’t increased risk,” Pulte said, according to Marketplace.org. “In fact, it’s decreased risk, with what we’re doing here.”
Initially, lenders including Pennymac and Rocket Mortgage, along with 19 other large institutions, will be permitted to use VantageScore 4.0 in mortgage underwriting, Marketplace.org reported.
