00:00Silvio, great to have you on on the program. I think the last time we spoke to you was when
00:04there were rumors swirling about the potential for the federal government to actually sort of formalize what they had been
00:10jawboning about. Were you aware that this was coming down the pipe this week?
00:15Well, yes, there were two key points that were made in the press conference with the FHFA director and the
00:20secretary of housing and urban development. And the first point is that Fannie Mae and Freddie Mac are ready to
00:27accept Vantage Score for now.
00:29They had made that decision a year ago. But what they announced Wednesday was they are ready to go. All
00:35systems are go. Vantage Score can be used for all conforming Fannie and Freddie mortgages. That's about 50 percent of
00:42the mortgage market.
00:44The second piece of news that we heard was that the FHA, which is within the secretary's housing and urban
00:52development department, they, too, have announced that they will accept Vantage Score for.
00:56And that's new. HUD loans account for about 20 percent of the mortgage market and Vantage Score will be able
01:02to be used for those as well.
01:04Big news, the bottom line, significant cost savings for mortgage lenders and American consumers. We expect about a billion dollars
01:12just in the next 12 months from competition for credit scoring.
01:15The other big news is greater access to mortgages. We expect over a trillion dollars in new mortgage volume to
01:23be allowed to creditworthy consumers.
01:25It's great news for the American consumer, great news for the mortgage market and more generally great news for the
01:30economy.
01:31Well, before we go deeper in this conversation, I do want you to just articulate the difference between Vantage, Vantage
01:37Score 4.0 in terms of how it actually sort of measures your credit worthiness,
01:42because this was a big issue of debate here relative to what we saw with some of the more traditional
01:47longstanding credit scoring companies.
01:49The key the key here remain is that the Vantage Score credit score is quantitatively empirically better.
01:56It enables the mortgage lender to use more modern credit report data.
02:03We call that trended data. And it also uses alternative data, including rental payments.
02:09This is critical because these data sets enable a more accurate measurement of risk.
02:14And so the bottom line is it's a better score and it improves substantially the ability for mortgage lenders and
02:22mortgage guarantors like the government agencies.
02:25It enables them to measure risk more effectively. It's a big, big deal, great modernization that benefits all the parties
02:33in the mortgage ecosystem.
02:35And, yeah, you take a look at some research coming from the Urban Institute.
02:39They found that Vantage scores on average are about 14 points higher than classic FICO scores.
02:45And it's interesting to hear the breakdown in what you're looking at there when it comes to putting together that
02:50score.
02:51So talk to us a little bit about those additions that you made, you know, the idea that you're going
02:57to factor in rental,
02:58that you're going to factor in utility payments as well.
03:03Well, that's the that's the that's the the challenge is that, you know,
03:06some of the industry forecasters don't look at the data accurately.
03:11It's much better to rely on the publicly reported data and analyses done by third party research firms and the
03:17largest banks.
03:18What they conclude is that Vantage score, in fact, predicts more delinquencies and actually has a lower average Vantage score.
03:26The average Vantage score through the end of March was 701.
03:28We score on a scale minimum score of 300, highest score, 850.
03:34Our competitor uses the same scale.
03:37And if you look at our average credit score, it's 701.
03:40If you look at their average credit score, it's something more like 713, 714.
03:44So it's their score, which is higher and looser.
03:47Our score is more predictive.
03:49And in fact, your own analysis at Bloomberg Intelligence and a separate group has shown that during times of volatility,
03:56our score identifies up to 15 percent more delinquencies, mortgage delinquencies.
04:02So the score is more modern.
04:04It includes better data.
04:05And because of competition, we're able to deliver significant cost savings to both mortgage lenders and consumers at a time
04:13where,
04:13let's face it, the mortgage market is tough.
04:15So it's perfect timing as well.
04:18I take your point.
04:19Just to be clear, I'm citing data from the Urban Institute.
04:22Those are their findings.
04:23But, Sylvia, I do want to follow up on what you're saying about, you know, how this could impact affordability.
04:29You think about the housing market in this country.
04:32Certainly a lot of folks have felt locked out of that.
04:35You've seen the average age of first-time homebuyers rise as well.
04:39So draw the line there between, you know, this decision and what you view as the next step towards housing
04:46affordability.
04:47Well, the reality is, as you point out, is that the mortgage industry and the housing industry is in crisis.
04:53It's one of the key ways that Americans are able to access the American dream and live their best financial
04:59lives.
05:00What VantageScore does is it enables mortgage lenders to back the right consumers that are, in fact, creditworthy.
05:06And we do this by using modern analytical techniques, but also better data and more data than the incumbent score.
05:13Look, the incumbent score has been around for over 30 years.
05:16You know, when you look back at the financial crisis, that was the score that was used.
05:20It hadn't been modernized.
05:22It hadn't been updated.
05:23Now that monopoly over that score is over.
05:27May it rest in peace.
05:28It's time for competition.
05:29It's time for better, more modern credit scores to be used.
05:33And that's the decision that the FHFA director made.
05:37That's the decision that the Secretary of Housing and Urban Development made.
05:40And we applaud them.
05:41And as you can see in the data, the markets applaud this decision.
05:45It's really important.
05:46And it's just in time.
05:48You know, Sylvia, I do just want to get your take, though, a little bit on the health, though, a
05:52little bit more of the mortgage market.
05:53And I know you're not an economist.
05:55But this idea here that with mortgage rates at, you know, basically, what, 6.3 percent or so on average,
06:01the idea and then home prices continuing to go up here.
06:04I mean, there is not a lot of options for a lot of folks out there, even if you have
06:08good credit, even to be able to afford into a home unless you are extremely high income.
06:14Does that change any time soon?
06:15Are you seeing any sort of relief in any other pockets of the market?
06:19Well, I think the reality is, is that the mortgage market is quite complex.
06:24The housing market is quite complex.
06:26We can't say that one thing solves the whole challenges and is the panacea.
06:32What we can say is that with using better data and analytics, we can more effectively pinpoint the consumers that
06:39are credit worthy.
06:40And when we do that using the vantage score, it reduces the risk for the overall system and it reduces
06:46the cost to access mortgage financing for the overall system.
06:50That's a good result.
06:52And it's, in fact, why the regulators made this decision using vantage score reduces risk.
06:57It reduces the overall cost to the ecosystem.
06:59And that ultimately means more American consumers in homes.
07:04And that's what we all want.
07:05That's what the market wants.
07:06And we can't forget that housing is a key driver of the economy and it's a key driver of affordability.
07:13And that is the objective here.
07:14And that's what this decision, these decisions deliver.
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