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Mortgage insurers must hold more capital for VantageScore 4.0 loans
New PMIERs guidance from Fannie Mae and Freddie Mac adds VantageScore 4.0 factors, and for a $300,000 loan with 85% LTV can increase required assets by as much as $4,980 versus Classic FICO.
Fannie Mae and Freddie Mac have updated their Private Mortgage Insurer Eligibility Requirements (PMIERs), adding a VantageScore 4.0 credit score grid and generally requiring mortgage insurers to hold more risk-based assets for comparable loans that use VantageScore 4.0 rather than Classic FICO, HousingWire reports.
The guidance, issued under oversight of the Federal Housing Finance Agency, uses percentage factors to determine required asset amounts based on a loan’s original loan-to-value ratio and original credit score. As with Classic FICO, higher LTVs and lower credit scores raise required asset factors, but the factors are generally higher under the VantageScore 4.0 grid.
In an example cited by the outlet, for a $300,000 loan at 85% LTV, a borrower with a 680 credit score would require $22,530 in required assets for a VantageScore 4.0 loan versus $17,550 for a Classic FICO loan, a difference of $4,980. For the same $300,000 loan with 95.5% LTV, HousingWire points to an increase of $7,440 for a 680 credit score scenario, with required assets of $50,190 for VantageScore versus $42,750 for Classic FICO.
HousingWire also notes that a VantageScore spokesperson, in a statement to the outlet, said it is not VantageScore’s policy to comment on FHFA or GSE pricing, while praising the modernization effort as improving competition, lender savings, access to mortgage finance, and the safety and soundness of the mortgage finance system.