GSE Adoption

On Tuesday August 13, 2019 the Federal Housing Finance Agency (FHFA), which regulates both Fannie Mae and Freddie Mac (a.k.a. the Government-Sponsored Enterprises, or GSEs) issued a final rule to address the lack of credit score competition in the mortgage market. The new rule permits model developers to participate in an application process whereby new credit score models will be assessed by Fannie Mae and Freddie Mac across a number of different parameters such as predictiveness, inclusivity and other potential markers.

The new rule requires the GSEs to put in place a process by which newer and more predictive and inclusive scoring models may be considered and, in the process, ending a long-held, government-sanctioned monopoly for FICO.  

See the details of the final ruling here.


Mortgage industry market participants and the consumers they serve should be afforded the same opportunity as all other lending industries: the benefits of competition.

Credit score competition in other loan categories such as credit card and auto loans has enabled more predictive models that expand the scoreable population. In fact, this competitive, innovative environment has facilitated the development of VantageScore 4.0, a model that allows lenders to accurately assess approximately 40 million more consumers than conventional credit scoring models in a safe and sound manner. Many of these consumers deserve a chance at the American Dream of sustainable homeownership.

A breakdown of who these consumers are is as follows:

Emerging Borrower/Young File

Young to credit

Consumers that have only credit accounts that are less than six months in age


Infrequent or rare users of credit

Consumers that haven’t had an update/reporting on their credit files in the past 6 months but have had updates more than 6 months ago

No Trades

Have only external collections, public records and inquiries on their file

 Consumers that have no credit accounts but are scored based on the external collections and public records on their file

Demographic breakdown:

2018 Unscoreables – All Scores

2018 Unscoreables – Scores 620+


40 million

10.06 million

Black and Hispanic

12.2 million

2.4 million


1.6 million

<1 million


25.7 million

7 million

Native American



The potential result of FHFA’s rule is that lenders can grow their businesses in a compliance-driven environment and more consumers can gain access to mainstream credit grantors without sacrificing their credit or pricing standards to reach a larger pool of prospective customers.

Who uses VantageScore? Click here to see how more than 2,500 lenders use VantageScore credit scores in their businesses.

HISTORY IN THE MAKING: A Timeline of events leading up to credit score competition

On May 24, 2018, the President signed into law “The Economic Growth, Regulatory Relief, And Consumer Protection Act” (S. 2155) as Public Law 115-174.  Section 310 of the new law amends the Federal National Mortgage Association Charter Act and the Federal Home Loan Mortgage Corporation Act by ordering the Federal Housing Finance Agency (FHFA) to establish standards and criteria for processes used by Fannie Mae and Freddie Mac to validate and approve credit-scoring models. Thus, establishing competition in the mortgage marketplace for credit score model developers, for the benefit of consumers and lenders.

However, a minor setback occurred. In December 2018, the FHFA regretfully proposed a rule that actually perpetuated and strengthened the FICO monopoly in the mortgage market by essentially ruling all of FICO’s current competitors “ineligible.”

With the support of the mortgage industry, participants were invited by FHFA to provide feedback on the proposed rule up until March 29, 2019.

After having received public comment on the proposed rule, the newly-installed Director of FHFA,  Dr. Mark Calabria, removed the provision from the proposed rule that would have prohibited credit score competition in the mortgage arena, paving the way for VantageScore and other market participants to apply for GSE adoption.

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