Pennymac has rolled out VantageScore 4.0 across its consumer-direct, broker, and correspondent businesses, giving originators another major lending platform where the alternative credit score can be used on eligible loans.
The company said Monday that VantageScore 4.0 is now live across its entire production platform. Pennymac had already notified correspondent sellers that it would begin accepting the score Oct. 2 for eligible conventional loans sold to Fannie Mae and Freddie Mac.
For brokers, VantageScore 4.0 is now integrated into Pennymac's POWER+ platform.
"We intend to be at the vanguard of credit score modernization because we firmly believe it will lower costs and support homeownership across America," Pennymac Chairman and CEO David Spector said.
Pennymac joins other major lenders putting VantageScore into production following the Federal Housing Finance Agency's decision to allow approved GSE lenders to use either VantageScore 4.0 or Classic FICO on eligible loans.
Lenders Are Taking Different Approaches
Rocket Mortgage recently said it plans to make VantageScore 4.0 its preferred model for eligible retail loans after testing it against Classic FICO for roughly four months.
United Wholesale Mortgage, meanwhile, gives brokers access to both models. Last week, UWM removed the 20-point adjustment it previously applied to VantageScore 4.0 after Fannie Mae and Freddie Mac aligned their loan-level pricing treatment of VantageScore 4.0 and Classic FICO.
The two models won't necessarily produce the same result for the same borrower.
UWM said in September that about 25% of borrowers evaluated with VantageScore 4.0 were getting a more favorable result than under Classic FICO. The company said at the time that it expected that share to reach roughly 40% as its use of the model expanded.
Rocket also reported differences during its testing. The lender said more borrowers were able to qualify using VantageScore and reported average closing savings of $1,600 among borrowers who saved money under the model.
Those are results reported by the lenders, and VantageScore won't necessarily be the better option on every file. Some borrowers can receive a stronger result under Classic FICO.
But with Pennymac now joining Rocket and UWM in putting VantageScore into production, more originators have an opportunity to see whether the choice matters for a particular borrower.
Pennymac Brings VantageScore To Correspondent
Pennymac's correspondent business makes this rollout particularly notable.
The company purchases loans from independent mortgage banks, regional lenders, community banks, and credit unions, extending its VantageScore policy beyond loans originated through Pennymac itself.
Under correspondent guidance issued Oct. 2, Pennymac said VantageScore 4.0 can be used for eligible conventional GSE transactions that meet applicable program guidelines and receive the appropriate VantageScore feedback through Fannie Mae's Desktop Underwriter or Freddie Mac's Loan Product Advisor.
That gives Pennymac's correspondent sellers another execution for eligible loans using the model.
The Tri-Merge Isn't Going Away Yet
More choice between scoring models doesn't mean LOs can stop pulling three-bureau credit reports.
Pennymac's correspondent guidelines require loans using VantageScore 4.0 to have a tri-merge credit report containing both Classic FICO and VantageScore 4.0 scores for all borrowers. The same scoring model must be used for all borrowers on the loan for underwriting and pricing.
That requirement comes while the industry is pushing FHFA to change a different part of the credit process.
NMP reported Monday that the fight over mortgage credit reports is heating up ahead of an expected FHFA move, with the agency reportedly considering allowing lenders to use two-bureau, or bi-merge, reports for GSE loans.
FHA, meanwhile, has said it plans to retain its tri-merge requirement.
For LOs, the two issues are increasingly intertwined. Lenders are getting more options for which credit score they use, while the rules governing how many bureau reports they need to pull are still in flux.
Pennymac's rollout puts another major lender — and another major correspondent outlet — into that mix.
