On July 11, 2024, Fannie Mae and Freddie Mac released the latest update on the FHFA Credit Score Initiative Playbook. Included in this is an updated timeline which has not changed much from the timeline from the last update. At this point they are still targeting Q4 2025 for the full implementation of the new scoring models and the commencement of the bi-merge option.
For now, they are continuing to hold “Stakeholder Forums” which is their avenue for industry professionals to provide feedback and concerns regarding the upcoming changes. Anyone wishing to participate in the forums can send an email to creditscores@fhfa.gov, provide them with your information and your desire to be part of the forums.
The transition to the utilization of FICO 10T and Vantage 04 and the bi-merge option will take place in two Phases. The Interim Phase and the Full Implementation Phase. Each Phase also has two parts to them.
- During the first part of the Interim Phase only the Classic FICO scores (currently used) will be utilized.
- During the second part of the Interim Phase Classic FICO along with FICO 10T and Vantage 04 will be utilized.
- During the first part of the Full Implementation Phase, again, Classic FICO along with FICO 10T and Vantage 04 will be utilized.
- During the second part of the Full Implementation Phase only FICO 10T and Vantage 04 will be utilized. The Classic FICO scores will at this time be retired. This Phase is also when the bi-merge option comes into play.
Currently, there is no confirmed start date for the Interim Phase or its duration. However, indications are that it could possibly begin in Q1 2025 and last for 6-9 months. In the second part of the Interim Phase and the initial part of the Full Implementation Phase each borrower will have nine credit scores. In the second part of the Full Implementation Phase, each borrower will have six scores on a tri-merge and four scores on a bi-merge.
How the determining score for DU will be calculated is being considered at this point but looks like it will lean towards an “average” score. Examples can be seen of this in the new Playbook.
Items to note:
- There is no word yet from the bureaus on cost.
- None of these changes include the non-conforming loans.
- The extent to which the bi-merge will be utilized is uncertain at this point. Currently, few lenders are willing to accept a bi-merge report, preferring to continue using the tri-merge. (The bi-merge is only an option, the tri-merge will remain available).
- FHA, VA, USDA are not on board with this initiative yet.
- This also includes Jumbo loans where are above the Fannie Mae and Freddie Mac limits.
- FHFA is currently in communication with these entities.
Many questions remain unanswered regarding this transition, and its implementation. Hopefully, the upcoming Stakeholder Forums will address all these questions and concerns. For more information regarding the Initiative you can access the Playbook here: https://singlefamily.fanniemae.com/originating-underwriting/credit-score-models or https://sf.freddiemac.com/general/credit-score-models