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New Research Indicates Lenders Could Originate Up To $1 Trillion In New High-Quality Mortgage Loans
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Adoption of VantageScore 4.0 Helps Address the Racial Homeownership Gap While Improving Predictive Performance
VantageScore released research on the quantitative impact of requiring VantageScore 4.0 credit scores, as mandated by the Federal regulator, for all Government-Sponsored Enterprise (GSE)-funded mortgages beginning in 2024. Key findings of VantageScore’s analysis include:
- Imposing a minimum VantageScore credit score of 620 and applying a mortgage eligibility age criterion of 25-65 will give 4.9 million new borrowers access to the mortgage market.
- From this new pool of borrowers, VantageScore estimates that lenders could originate as many as 2.7 million mortgages, with an annual loan volume as high as $1 trillion.
- Default rates for consumers newly assessed using VantageScore 4.0 were better or similar to those of consumers conventionally scored.
Outdated models in housing finance often exclude millions of creditworthy, underserved borrowers. Contrary to the conventional wisdom that newly scoreable consumers have little to no credit history, VantageScore’s research found that many consumers characterized as “dormant” were, in fact, simply infrequent or rare users of credit. One example might be a consumer who prefers to pay in cash but repaid an auto loan in the past six months without missing a payment. These consumers accounted for 73% of the newly scoreable and 91% of the newly scoreable population with scores over 620. Most of the remaining newly scoreable consumers were young or relatively new to the credit journey.
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“Implementing VantageScore 4.0 will benefit millions of consumers who are currently underserved or excluded from the benefits of homeownership,” said Anthony Hutchinson, Senior Vice President of Industry and Government Relations at VantageScore. “Our research found that areas with fewer conventionally scorable consumers reported lower incomes, higher rental rates, limited access to brick-and-mortar banks, and larger minority populations. The implementation of VantageScore 4.0 in 2025 will, therefore, yield immediate and significant benefits in expanding access to the mortgage market and narrowing the homeownership gap for creditworthy people of color. We must not accept further delay.”
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