Penetration of the VantageScore 4.0 model into the mortgage market has continued to increase, helped by a July spike, but still remains comparatively low, a Keefe, Bruyette & Woods report found.

Furthermore, the primary users of VantageScore so far are the two largest mortgage companies in business, United Wholesale Mortgage and Rocket.

In July, 4.4% of mortgages used VantageScore, KBW's Bose George said in a flash note. For the first few weeks in August, the penetration rate has continued to increase, he added.

In April, Fannie Mae and Freddie Mac (through their regulator the Federal Housing Finance Agency), along with the Federal Housing Administration all said they are now accepting mortgages scored with VantageScore 4.0. The Department of Veterans Affairs does not have a credit score model requirement and has been accepting loans using not just VantageScore 4.0 but also FICO 10T since at least 2024.

Mortgage originators acceptance of VantageScore 4.0

While this growth is expected to continue, "we believe that we would need to see adoption from other lenders for the industry penetration rate to see a meaningful increase from current levels," said George.

"Based on our conversations with companies in our coverage universe, we believe that VantageScore is currently being seen as a way to potentially broaden the mortgage market as opposed to a way to cut costs, so we believe most lenders are still pulling FICO scores for almost all loans."

VantageScore Solutions has previously said its model can score more consumers than Classic FICO.

How UWM is using VantageScore

UWM is actively promoting the use of VantageScore with its mortgage broker partners and so far has seen "thousands of borrowers go from no loan to loan," said Desmond Smith, chief growth officer, in a written reply.

"The additional credit scoring option has yielded very positive early results, creating opportunities for borrowers who may not have qualified otherwise and, in some cases, providing access to better pricing."

Having this alternative to Classic FICO gives UWM's mortgage brokers the flexibility to find a path forward for consumers and it will continue to encourage them to explore what opportunities using VantageScore can provide, Smith continued.

What are the changes to the PMIERs?

In an earlier note, George pointed out the Private Mortgage Insurer Eligibility Requirements are being adjusted by Fannie Mae and Freddie Mac to account for the differences in the scoring models.

The PMIERs are a capital test based on a calculation of the available assets to the minimum required assets.

"The original credit score used to determine the risk-based required asset amount factor is defined as the representative credit score that meets the guidelines of both Fannie Mae and Freddie Mac," states the PMIERs guidance which is effective on Sept. 30.

"If the approved insurer receives multiple credit scores at time of application, the approved insurer must report all credit scores received and identify the representative credit score and credit score model used for determining the risk-based required asset amount factor."

When the lender sends the loan file to the MI underwriter and submits both scores, the insurer may select the model to determine the risk-based required amounts for the calculation.

The Fannie Mae guidance includes grids for both models. For VantageScore, most buckets have higher required capital levels and correspond to the same for a Classic FICO loan with a credit score which is 20 points lower, George said in his first flash note on Aug. 10.

As of the end of July, FICO said over 70 mortgage originators had signed up to use the 10T model. 

GSE submissions that use the VantageScore model

In his latest research, George reports 3,750 Fannie Mae loans and 3,650 Freddie Mac loans were scored using VantageScore 4.0. Total new-issue mortgages for the month were 167,792, giving VantageScore a 4.41% market share.

In June, the share was just 0.74%.

On July 31, 6.86% of GSE loans submitted used VantageScore 4.0. George then cited Aug. 10, where over 12.7% of submissions used the model, while on Aug. 14, it was 9.9%.

But by loan count, on Aug. 14, Fannie and Freddie received a total of 2,375 VantageScore 4.0 loans with an unpaid principal balance of $1.2 billion; the GSEs acquired 24,028 loans on that day.

For Aug. 10. 1,868 loans were submitted with a UPB of $879 million which used VantageScore 4.0. Total new-issue loans at both companies was 14,677.

By lender on Aug. 14, Rocket submitted 2,506 loans to Fannie Mae with 818 using VantageScore; to Freddie Mac, it submitted 2,694, with 862 using VantageScore.

UWM had a slightly lower penetration rate; 276 of the 892 mortgages sent to Fannie Mae and 412 of the 1,310 sent to Freddie Mac used VantageScore.

The other two lenders in George's data were AmeriSave, with four loans submitted to Fannie Mae and two to Freddie Mac using VantageScore, while Pennymac had a single loan sold to Freddie Mac.

"UWM remains a champion for brokers, borrowers and the wholesale channel, so when VantageScore provides another way to qualify creditworthy borrowers and expand access to homeownership, it's a win for consumers, a win for independent mortgage brokers and a win for the wholesale channel," Smith said.

National Mortgage News also reached out to Rocket for a comment, but it has not responded as of press time.