Credit score modernization has entered a new phase. As lenders prepare for the future, understanding how to evaluate and operationalize next-generation credit scoring models has become increasingly important.
Join FICO and LoanPASS to see how lenders can evaluate FICO Score 10T at scale and better understand the benefits of more predictive credit scoring for lending decisions, portfolio performance, and borrower access.
What you'll learn:
Where credit score modernization stands today.
Why FICO Score 10T is the most predictive credit score available for mortgage lending today and what greater predictive power means for lenders, borrowers and investors.
How LoanPASS's batch pricing tool works and how lenders can use it to compare loan pricing and borrower outcomes between FICO Score 10T and Classic FICO across thousands of loans simultaneously
Why stronger predictive accuracy expands credit access and improves outcomes for lenders, borrowers, and the secondary market
How to begin evaluating FICO Score 10T across your own origination footprint today through the FICO Score 10T Free Access Program at no cost
In partnership with: FICO
#CreditScoreModernization #MortgagePricing #FICO10T
Join FICO and LoanPASS to see how lenders can evaluate FICO Score 10T at scale and better understand the benefits of more predictive credit scoring for lending decisions, portfolio performance, and borrower access.
What you'll learn:
Where credit score modernization stands today.
Why FICO Score 10T is the most predictive credit score available for mortgage lending today and what greater predictive power means for lenders, borrowers and investors.
How LoanPASS's batch pricing tool works and how lenders can use it to compare loan pricing and borrower outcomes between FICO Score 10T and Classic FICO across thousands of loans simultaneously
Why stronger predictive accuracy expands credit access and improves outcomes for lenders, borrowers, and the secondary market
How to begin evaluating FICO Score 10T across your own origination footprint today through the FICO Score 10T Free Access Program at no cost
In partnership with: FICO
#CreditScoreModernization #MortgagePricing #FICO10T
Category
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NewsTranscript
00:03Welcome to today's webinar. I'm Allison LaForgia, the Managing Editor at HousingWire. And today's
00:11webinar, Credit Score Modernization and What It Means for Pricing and Eligibility, we'll start
00:17in a few moments. Devin, Derek, how are we doing today? Doing awesome. Good. Good to see you,
00:25Allison. Good to see you guys. I am excited to jump into today's content. I see that we have our
00:36attendees rolling in, so I'm going to start with a couple of housekeeping notes, and then I will
00:41turn things over to y'all. First, before we dive in, at the top of your screen, you will see
00:48an option
00:49for ask a question, resources, and even emoji reactions at the bottom of your screen. This
00:55is meant to be interactive, and we want to hear from you. If you have any questions about anything
01:00that Devin or Derek mentioned throughout today's presentation, you can send them at any point in
01:05time by using that Q&A function. I will be keeping an eye on them throughout the conversation today,
01:12and we will get through as many as we can, time permitting, at the end of the webinar. Now, we
01:18have
01:18some fantastic panelists who will be featured in today's conversation. First, we have Devin
01:25Norales, the Head of Mortgage and Capital Markets at FICO. Hi, Devin.
01:30Hey, Allison.
01:32We also are joined by Derek Long, the COO at Loan Pass. Hi, Derek.
01:38Hello, Allison. Glad to be here.
01:41Excited to jump in. All right. Now, before Derek and Devin take things away,
01:48we're going to start with a poll question. So, on your screen, you will see the first poll question,
01:55which is, is FICO owned by or part of a credit bureau? Click A for yes or B for no.
02:06I'll give you all a couple of moments to send in your responses, but let us know what you think.
02:18I'm interested to see if people will get this answer correct or not.
02:23Me too. I hope they do.
02:27Well, the good news is, so far, 100% of the responses are no.
02:35Wow. So, Devin, is that correct or incorrect?
02:41That is correct. And I'm really happy to hear that because I think a couple of years ago,
02:45that might not have, those results might not have done the same.
02:48All right. And now, we're going to go to our second poll question, which is,
02:59what is the definition of a FICO spec payoff?
03:06The first option for an answer A is above 740. B is below 700. C is above 700. And D
03:16is below 680.
03:18So, we are testing your knowledge here. So, this also has a very high percentage. 100% have submitted B
03:30as the correct answer.
03:32Oh, it just split. So, now, I'm going to look at these responses because it changed in real time.
03:40We are at 41% above 740 and 16% below 700.
03:48Well, in terms of MBS spec payups, that would be the latter answer of below 700.
03:55So, in order to gain a FICO spec payup, you have to pull and securitize all your loans that are
04:01below that 700 cutoff.
04:05All right. Now, we are going to jump right into today's content.
04:11Devin, I'm going to pass things over to you to lead us through the actual content portion of today's webinar.
04:17And remember, to our audience, you can submit questions for Devin or Derek anytime by using the Q&A function
04:23at the top of your screen.
04:25Devin, the floor is yours.
04:28Awesome. Awesome. Awesome. Thank you. Thank you for that.
04:32And I appreciate everyone participating in the little fun poll we started with.
04:37So, good afternoon, everyone, and thanks for joining us.
04:40I'm Devin Nerales, head of mortgage and capital markets here at FICO.
04:44And I'm joined today by Derek Long, the chief operating officer at Loan Pass.
04:48Today, we're talking about credit score modernization, specifically what it means for pricing and eligibility in the mortgage market.
04:55This isn't a theoretical conversation anymore.
04:58FHA approved lenders can start using FICO score 10T starting January 1st, as well as other approved models that are
05:08eligible today.
05:09So, the questions we're covering today, what changes, what it costs, what it means for your pipelines?
05:17Are pricing and risk the most important?
05:20And then I'll hand it over to Derek, who's going to show you how Loan Pass lets you take the
05:24industry-level findings and run them against your own loans.
05:27We'll leave time at the end for questions, so please drop those in, and we'll go ahead and get as
05:31many as we can.
05:38Awesome.
05:39So, let's start with the landscape as it stands today, where we are and how did we get here.
05:46Here's where things stand.
05:48GSE approved lenders today can already deliver loans scored on either Classic FICO or Vantage Score 4.0, and each
05:55of those sits on its own separate pricing grid.
05:58That's what the industry calls lender choice.
06:00And it's really the thread that runs through everything we're going to cover today.
06:04On top of that, the GSEs have now released 12 years of historical loan-level data scored on FICO score
06:1010T.
06:11That's a huge data set, and it's what's allowed us and a number of independent research shops to actually test
06:18how these scores perform against real loan outcomes, not just theory.
06:23And here's the date that matters the most for a lot of you on this call.
06:27FHA approved lenders can start using FICO score 10T on January 1, 2027.
06:33That's not far off, and it's why we wanted to get in front of you now to educate as much
06:38as we can ahead of the upcoming transition.
06:46So, before we dive in, I want to take a step back here, because this slide is really the foundation
06:52of everything else we'll talk about.
06:54The FICO score is the thing the mortgage industry already relies on.
06:58It's the common reference point that runs across origination, pricing, securitization, and servicing.
07:03Marketing teams use it to target qualified borrowers efficiently.
07:06Lenders use it for pre-qualification and pre-approval to assess eligibility early and with confidence.
07:13It drives product alignment, matching borrowers to the right loan products, and it drives upfront pricing.
07:19So, risk gets priced accurately, and borrowers can actually comparison shop.
07:24It standardizes credit risk evaluation and underwriting.
07:27On the capital market side, it's part of what investors use to predict mortgage-backed securities performance and support liquidity
07:34to price and segment loan pools and sales, and to manage default and prepayment risk.
07:40Servicers use it to spot refinance opportunities for their borrowers, and across all of that, it's the industry standards.
07:47Lenders, investors, and regulators all trust it as the common language.
07:50So, when I say a change to the score isn't a narrow underwriting question, this is why.
07:55Touch the score, and you touch pricing.
07:58Eligibility, securitization, and servicing all at once.
08:01Here's the thread I want you to hold onto for the rest of the session.
08:05If the score itself moves, pricing moves right along with it.
08:09Keep that in mind, because it's going to come back again and again as we look at the data.
08:16So, let's talk about FICO score 10T itself and why we built it.
08:21There are really four things it does for lenders today.
08:24First, it can expand approval rates by up to 5%, and it does that without adding any incremental risk to
08:30your borrower pool.
08:31So, you're growing volume, not growing risk.
08:34Second, it leverages trended data, which adds real predictive lift in key segments, including borrowers with thin credit files who
08:42might otherwise get passed over.
08:44Third, it can sharpen MSR pricing.
08:4710T provides an additional credit data point that can allow lenders to sharpen their MSR price, which can directly translate
08:54to better rate-cheap pricing.
08:56And fourth, and this matters a lot for adoption, it's a seamless transition.
09:00It's built on the same trusted FICO score blueprint you already know.
09:04There's no remapping, no recalibration, no guesswork required to bring it into your existing process.
09:15This chart is dense, so let me walk you through two or three rows that truly matter.
09:21Both FICO score 10T and Vantage 4.0 include trended data and reported rental payment history.
09:27So, on paper, they look similar.
09:29But I'd like to bring your attention to a few rows in particular.
09:33First, FICO score 10T's model has been unchanged since its GSE approval submission.
09:40Vantage score 4.0 has not.
09:42We know that VS4 removed medical collections from its score after GSE approval.
09:47The other key line item is the penalty for first-time homebuyers.
09:51VS4 will penalize a borrower for not having a mortgage trade line, whereas FICO scores do not.
09:58Those two rows are crucial differences to understand to these models.
10:02I'll also point out the rate shopping window.
10:04It's now standardized to 45-day across all FICO score versions, up from as little as 14 days for some
10:11bureaus, which gives consumers more time to shop for a mortgage without hurting their score.
10:16And in this rate environment, more time to shop can be a good thing, as we see the 10-year,
10:21you know, hitting over 5% on a daily basis.
10:25So, this one here is a really, really important chart that I think really gets to the meat and potatoes
10:30of what are the differences in these models and how they can impact a borrower being qualified for a mortgage.
10:41Now, let's talk about what the GSE data shows.
10:45This slide has two panels, and I want you to look at them together, not separately.
10:49The chart on the left shows that both FICO score 10T and Vantage 4.0 report higher scores than classic
10:55FICO across almost every band.
10:58We acknowledge that we see higher scores with 10T, but this is due to improved predictiveness, not just score inflation.
11:04But look at the chart on the right.
11:07This is the one that really matters.
11:08It shows the percent difference in actual 90-day plus delinquency rates between BS4 and FICO score 10T by score
11:16band.
11:17And what you see is that Vantage 4.0's default rates run higher than FICO score 10Ts in the high
11:23score buckets, 17% higher in 760 to 779, 13% higher in 780 to 799, and lower in the
11:33lowest score bucket.
11:34So, in plain English, BS4 is giving borrowers higher scores at the top of the range, but those higher scores
11:40aren't backed up by correspondingly lower actual risk.
11:46FICO scores 10T scores track real borrower performance more consistently across the whole range.
11:52Now, Derek, we know the weighted average FICO score on new issuance non-QRM production is north of 740.
11:58As a non-QRM investor, this chart would give me pause from a risk perspective, as we can see that
12:05a 740 FICO and a 740 Vantage are not the same.
12:09This could add additional layer of complexity when assessing risk.
12:13Any thoughts from your side?
12:14We know Loan Pass works very closely with many non-QRM investors.
12:18Yeah, we've got 40-plus investors in our system that do non-QM loans, and any of them that are
12:25doing both Vantage and or traditional FICO or 10T are going to have to have different LLPA grids for each.
12:33The risk tolerance, the default rate is so different that there's no way you can treat the number as of
12:42equal value.
12:42So it's going to make it very challenging for everyone to keep track of those differences, both in pricing and
12:48in eligibility.
12:51Absolutely.
12:51You're talking about adding another layer of complexity into what already can be a pretty complex process.
12:58And so, you know, I think the one thing I always tell folks is, and something we'll continue to echo
13:03with FICO, is a 740 with FICO is not necessarily a 740 with Vantage.
13:08And I think that the better you understand that, the better you'll be prepared for this upcoming transition.
13:15And I think the non-QM investors who hold real credit risk are guys that really need to understand that.
13:20And so we're really trying to make sure we get that message out there.
13:26All right.
13:26We'll go to the next slide.
13:30Now, let's get specific about where the advantage shows up most.
13:34We use two measures here, the KS statistic and bottom decile lift, both ways of measuring how much better FICO
13:41score 10T separates good loans from bad ones compared to VS4, using the combined Fannie Mae and Freddie Mac population.
13:50And this is not a small marginal edge.
13:53Look at New York, 10.5% lift on the KS statistic.
13:56First-time homebuyers, 10% lift.
13:59Purchase loans, 8.4%.
14:02And it's not just concentrated in one place.
14:05Indiana, Alaska, Missouri all show strong lift on the bottom decile measure, too.
14:10I want to call out first-time homebuyers specifically, because that's the segment where getting the score right matters most.
14:16Those are the borrowers with the least margin for error and the most to gain or lose from how scores
14:21treat them.
14:22We also called out the New York GEO, as that is a strong spec story that lenders continue to use
14:28in pricing.
14:28And we want to make sure that not only lenders, but investors understand the predictiveness that comes with the score
14:34on the spec loans that they are buying.
14:40The next slide shows how that lift has moved over time.
14:44And the story is that it's growing.
14:47Look at first-time homebuyers.
14:49The KS lift went from 9.2 in 2019 to 11.4 in 2023.
14:55And bottom decile lift went from 5.5 to 7.7.
15:00Purchase loans nearly doubled their KS shift from 6.6% to over 10%.
15:05Cash-out refries showed the same pattern in a shorter window, 22 to 23.
15:10Now, I'll flag one row honestly, because I want to be straight with this data.
15:15Single-family homes KS lift actually ticked down slightly from 9% to 7.4%.
15:21But look at the bottom decile lift on that same row.
15:24It jumped from 5% to 8.1.
15:27More than 60% growth.
15:29So even where one measure dipped a little, the other tells you the advantage in the riskiest part of the
15:34pool got meaningfully stronger.
15:36The overall point stands.
15:38In newer loan vintages, FICO score 10T's advantage over Vantage score 4.0 isn't fading.
15:46It's actually building.
15:52I don't want to over-narrate this slide.
15:55I'll just let the quotes speak for themselves, because these aren't from us.
15:59Bloomberg Intelligence back in July wrote that FICO's 10T has outperformed Vantage 4.0 at separating defaulters from non-defaulters
16:07in their representative data set.
16:09J.P. Morgan's securitized products research team also in July said their own analysis of the historical data that 10T
16:17does a better job of classifying credit risk than BS4.
16:20J.P. Morgan Stanley Research reached a similar conclusion in their August note.
16:24J.P. Three independent research shops using the same GSE historical data all landing in the same place.
16:31I show this because I truly want to encourage the industry to do their own research, as we are confident
16:36the data speaks for itself.
16:42So, that's performance data.
16:44Now let's talk about what this actually means for pricing, for eligibility, and for the non-QM market.
16:53This is really a pricing recommendation slide, so I want to be direct about it.
16:58FICO gives lenders two approved scores on a single credit pull, classic FICO and FICO score 10T.
17:05VS4 only gives you one option, and when we ran FICO's analysis of the GSE historical loan data, the FICO
17:12-only combination, using both classic FICO and FICO score 10T together, materially improves loan pricing compared to Vantage score-only
17:21scenarios.
17:22Put simply, for the same borrower, the FICO path gets you the best pricing outcome.
17:27That's the case I'd make to anyone deciding which scores to build their pricing strategy around.
17:35Our review of the GSE historical data shows FICO gives borrowers the same or better price, the Vantage 4.0,
17:4281.2% of the time, 52.1% strictly better, 29.1% awash, and Vantage score only wins
17:5218.8% of the time.
17:54We translated that into dollars using average LLPA across a representative portfolio.
18:01Waiting by score and LTV and by purchase-refi mix, even after the cost of pulling a second score, FICO
18:08comes out cheaper on average, and individual borrowers who benefit see far more anywhere from an eighth to seven-eighths
18:16of a point.
18:18Bottom line, lenders who want to offer the best price need to offer FICO, and borrowers should ask for it
18:24even if they have to pay for the pull,
18:25because, on average, they save hundreds, and the biggest winners save thousands.
18:31The number I want you to remember from this slide is 81.2.
18:34That's the share of loans that land in the same or better loan-level price adjustment bucket on FICO compared
18:41to Vantage score 4.0.
18:42While we can all agree that cost of credit is important, the data shows that having a FICO score will
18:48pay off when using risk-based pricing.
18:54Now, let's talk about what we are seeing now that VS4 has been in the market for a few months.
19:01Here's a number straight out of the market today, not a model output.
19:05This is public information that everyone has access to.
19:09The current weighted average note rate on a FICO Classic loan is 6.32.
19:14On a Vantage score loan, it is 6.57.
19:17That's a real quarter-plus gap borrowers are experiencing right now.
19:23And if you look at the chart on the right, VS4 usage has been climbing through 2026, and we are
19:28seeing some concentration in higher score bands.
19:32I connect that back to the chart we saw earlier.
19:34That's exactly the part of the score range where VS4 default rates run highest relative to FICO score 10T.
19:41So the usage growth is happening where the risk gap is widest.
19:45Again, this is something to consider when deciding how to create your pricing strategy.
19:54I want to slow down on this slide because it's the most important caution in the whole presentation.
19:59This is a February 2026 piece with a pretty direct type, Washington inflates credit scores and another housing bubble.
20:07The quote says we're seeing history rhyme as federal housing regulators create incentives that could lead to inflated credit scores,
20:16letting riskier borrowers take out lower interest mortgages.
20:20And this isn't just an op-ed opinion.
20:22Three independent research groups have looked at this.
20:25The American Enterprise Institute studied the effect of a two-score system on loan-level pricing adjustments.
20:31Milliman found that lender choice introduces a bias to default rate estimates in mortgage underwriting.
20:37And Chesapeake Risk Advisors, in a study covered by Housing Wire, found that the lender choice scenarios could increase serious
20:43delinquencies, 90-plus day rates, by about 0.44 percentage points, or roughly 18%.
20:50I want to be clear that this isn't FICO making this argument on our own behalf.
20:55These are separate outside researchers using GSE historical data, all reaching the same conclusion.
21:01And again, I encourage those who are listening today to really do your own research and do your own analysis
21:07on how this will impact your business.
21:09Because this is a monumental change that has not happened and is something that the industry needs to be prepared
21:15for.
21:17So, that's the industry-wide view.
21:20Now I want to bring it down to the level that actually matters to you, your own portfolio, and talk
21:24about how FICO and Loan Pass are helping lenders do that.
21:31Everything I've showed you so far is industry-level analysis.
21:36It's real.
21:37It's robust.
21:37It's built on roughly 50 million GSE loans.
21:40But it doesn't tell you what happens in your own pipeline, with your own loans, your own borrowers.
21:45That's exactly the gap Loan Pass closes.
21:48Loan Pass puts this comparison where pricing actually happens.
21:51The same loans, scored both ways, run through real pricing and eligibility rules.
21:56So, you can see the actual effect on rate and borrower outcomes in your own book and business.
22:02And Loan Pass is the first product and pricing engine to integrate FICO Score 10T into its platform.
22:08Which means lenders can evaluate credit risk using trended data, even on non-conforming loans.
22:14So, with that, I'm going to hand it over to Derek, Loan Pass's COO, who's going to tell you more
22:19about who Loan Pass is and how they fit into your pricing and eligibility workflow.
22:25Thank you very much, Devin.
22:27Just a real quick introduction to Loan Pass, if you're not familiar.
22:30We are a decisioning and pricing engine that is also able to do AU for non-agency products, as well
22:38as the pricing and decisioning on the traditional government and agency stuff.
22:44So, where we really are unique is the configurability, the ability to do some unique things for each lender that's
22:52specific to them.
22:53So, if you move to the next screen, where we've really become known is in the non-agency and even
22:59the business purpose lending space.
23:00That area has grown tremendously because the guidelines are so unique, it requires a vast level of customization within the
23:10engine, which we are able to support.
23:12And we're to the point now where one out of every five non-QM or BPL loans originated in the
23:18U.S. are being decision and priced by Loan Pass.
23:22And then next, as we have grown, we've gotten the opportunity to work with some great partners, including FICO.
23:30So, in the next screen there, Allison, you can see some of those that we've worked with, the growth that
23:35we've been putting forth, a lot of it in that non-QM space.
23:40But, as Devin mentioned, a big piece of this has been FICO and us working together to find a solution
23:46that will give each lender the data they need to help making these decisions.
23:53Because, as Devin just pointed out, all the things he shared is historical and industry-wide, but not lender-specific.
24:01So, we think we've come up with a good solution for that, which I'd like to introduce and share with
24:05you now.
24:06So, I am going to share my screen, and this should all work perfectly, of course.
24:14And as I share, what you're looking at now is the FICO version of a tenant of Loan Pass.
24:22And I happen to have a jumbo loan set up in here.
24:25And what you're going to see is that currently we have a decision credit score of 715, and we have
24:32designated which type of credit score is being used.
24:37And in this case, it's FICO 4.
24:38And we have some jumbo options.
24:41So, if I click on one of those products, what you're going to see, for example, are 15-day, 7
24:47.25 is 100.609.
24:49And part of that is based on the credit score adjustment of an eighth hit.
24:55So, I'm going to go in here.
24:57We're going to change this to FICO 10T, and I'm going to change the score to 720.
25:02And the engine is going to instantly rerun.
25:05And now what you're going to see is the pricing is now improved by a quarter because of moving the
25:12credit score only five points because of the credit score bans in LLPAs.
25:17So, we've improved pricing by a quarter, and you can see that manually easily in the system.
25:24But nobody wants to try and go in and manually do a bunch of loans, especially because plenty of lenders
25:31have their own pricing engine and not LLPAs.
25:34So, what we've been able to do is we've created, through the sponsorship of FICO, a unique opportunity.
25:41I'm going to go into the pipeline section of this version of LLPAs, and currently there are no loans in
25:47here.
25:47But what we have built is the ability to take a group of records from your LOS.
25:55And here's a report that was mapped to Encompass.
25:58And so, this is the data that is necessary in order to get a decision that has credit scores and
26:07other details.
26:08And what we are doing then is we've set up the ability to upload those types of reports.
26:18It runs into LLPAs, which it's doing right now as I'm speaking, and what it's doing is it's making two
26:26records.
26:27It's creating one record that is for the classic score and one that is for the 10T score.
26:34I'm going to refresh the screen, and now you can see what just occurred.
26:37So, we've got, you can see that there are two records for each borrower, and you can see the difference
26:45in the credit score and which credit score type was used.
26:48We've got 10T, we've got the FICO 4, and you can see what's happening based on pricing of the difference
26:56that occurs based on what is happening with that credit score.
27:02It could be that the scores are the same, and there is no pricing difference.
27:06There's a few loans like that right here in the middle, or you can have some where the distinction is
27:11pretty profound, and you've got a better pricing option through using the 10T, or in some cases, the 10T may
27:19even be worse.
27:20But what it's doing is it's giving you the real data, and then you can basically from this, Loan Pass
27:28will deliver to you a report that is what happens with your loans so that you can go in and
27:37see on a live basis on loans before you even close them, what are the opportunities between the various options
27:44available to you.
27:46So it becomes your data, your research, your opportunity to find out on whether it's government loans, conventional loans, or
27:55the non-QM, what is the difference right now between those credit scores.
28:00So that's the tool that FICO has sponsored to make available to those lenders who really want to get the
28:07dig into the data as it relates to their own pipeline.
28:11So I think that's really what I was going to share.
28:14I will stop sharing and send it back over to Allison and Devin.
28:20Yeah, Derek, you know, I think what's really cool about the tool and why we found this really important for
28:27us to get behind here at FICO is the GSC records, all the data I went through, that is Fannie
28:32and Freddie, right?
28:33We know that is one type of population, but that's only one segment of the market.
28:38There's, you know, you have government loans, whether it's FHA, BA, USDA, you've got non-QM, you've got Jumbos, you've
28:46got HELOCs.
28:47There's all types of different products that that data set doesn't represent.
28:51And so we are very confident that the tool Loan Pass has built will actually allow folks to see, hey,
28:58what is the impact of these new credit models on my pipeline?
29:02And I think you made a really good point there because it can allow more opportunity, right?
29:07And as investors get more comfortable with it, whether it's the non-QM investors who can say, hey, I've got
29:13two FICO scores on this file now.
29:15This actually gives me more insight and new credit than I had previously.
29:19Our goal is that investors will see that benefit, and eventually that will flow into front-end pricing because we
29:25all know everyone is competing to try to get more loans through the door.
29:29And the non-QM sector is one that we are seeing continue to grow, and we think that these new
29:34credit models will only help that part of the business.
29:39Absolutely. It's a powerful way to know very quickly what is the difference between the two scores and what does
29:45it mean to pricing and eligibility because it can impact eligibility, obviously, because you move five points in credit score,
29:53and all of a sudden you've got more LTV.
29:55You've got other opportunities to do things, so it changes the game.
30:00Absolutely. I think the eligibility is another big key, especially in these products that are non-Fanny Freddy, right?
30:08Because you have things like months reserves that you have to consider, and they're all combinations, right?
30:13It's a combination of your FICO, your LTV, your months reserves, all that different stuff that gets factored in that
30:22can be the difference between you doing a loan versus not doing a loan.
30:26And so I think having that pricing and eligibility component is a win-win for the industry.
30:32So really, really impressed by what you guys have done.
30:36And that's what part of the tool will show is if one loan is rejected and the other is approved,
30:41you will have that information as well because you may not have a loan under the one score versus the
30:47other.
30:48So we're excited to be able to share this.
30:50As I mentioned, it's currently set up to map to encompass fields, but it can be done to other LOSs.
30:56We can provide the framework of what report you need, and then meeting with folks at FICO, they can arrange
31:03to get access to this.
31:06Absolutely. Absolutely.
31:07That's where my team is here to help.
31:09You know, getting the scores is kind of the first step, right?
31:12You have to be able to get the score to determine what your analysis will be, but that's where our
31:17team is here with our 10T for free program, you know, making sure that lenders have access to the score
31:24when they need it, and investors as well.
31:26I think that's a really interesting thing for the investor community is like, hey, I just bought a bunch of
31:31loans, and now I want to see what these other models are.
31:35How would that have affected the price that I gave to the price or the eligibility that I gave to
31:40the seller?
31:41So I really think this is something that is very, very useful, and it's something that lenders can use today
31:49to actually help their business.
31:51And just wanted to clarify, you don't have to switch to Loan Pass PPE in order to take advantage of
31:57it.
31:58You can stick with whatever you've got now.
31:59This is just an additional use case for how to price out some loans.
32:05Thank you for making that clarification, Derek, because I know, you know, that's a hard challenge having done it myself
32:11in the past, migrating an LOS or PPE, and, you know, I know that's scary.
32:18So really cool that Loan Pass is able to do this with any client.
32:22Yep.
32:25All right.
32:27Devin, Derek, how do we feel about jumping into Q&A?
32:32Let's do it.
32:33Let's do it.
32:33I think it depends on the question, but, yeah, let's go for it.
32:37I hear that as an invitation to test your knowledge, Derek.
32:40So with that, to our audience, as we start to wrap up today's conversation, you can still send your questions
32:46in by using that Q&A feature at the top of your screen.
32:50We'll get to as many as we can before we close out today's session.
32:53I do see that there are several.
32:55Like I said, we'll get through as many as we can.
32:57So let's start.
33:00As lenders evaluate different credit scoring models, what matters most in determining which model will deliver the best outcomes for
33:09borrowers and the market?
33:13Yeah, sure.
33:15Happy to take that one.
33:15So I think that's a two-question answer, right?
33:20Because obviously you want to make sure that the model you're using provides your borrower with the best opportunity to
33:26get into a home.
33:27But also on the flip side of that, these models are built based on their predictiveness, right?
33:35And what's important in the credit model is that someone who is buying or purchasing this loan understands the credit
33:43risk.
33:43So what I recommend is understanding how these scores impact your front end, and then based on how that impacts
33:52your front end, how will that translate to the back end and ensuring that you have liquidity for all your
33:59loan products.
34:00And so, you know, I think you have to really look at both of those.
34:04And when you do the math and when we do the math on our side, we clearly see that FICO,
34:08using a FICO score, whether it's Classic or Ted T, is the best option for, one, getting best pricing, but
34:15also having the most predictive value on the back end for your investors.
34:20I like the question, the last part, where it said both what's good for the borrower and good for the
34:26industry, because those may not always be the same thing.
34:29And I think we have to be very careful with this lender's choice.
34:32I mean, yes, one score could make it easier for the borrower to get approved, but that does not mean
34:40that it's good necessarily for the borrower or the industry if their ability to pay is not reflective of that
34:47score.
34:47So it's really balancing the two.
34:51Absolutely, Derek.
34:52And some of the things we've seen, you know, from just talking to investors is, you know, they're seeing, we
34:57know that the GSE has put a 20-point gap between the scores for the LLPAs and so on and
35:02so forth.
35:03What I can tell you is from actual boots on the ground is they're seeing wider gaps, right?
35:08And so if you're an investor, that is something you really, really have to keep in mind.
35:13And I think, you know, FICO is something that we pride ourselves on is, you know, we want to be
35:17good stewards of the industry.
35:18We're not here to just, you know, inflate scores so that, you know, everyone can get a mortgage.
35:23It's about doing it the right way so the system that's in place remains in place and repurchases don't go
35:30up and buybacks don't go up.
35:32Because at the end of the day, who's going to feel that is the borrower who's trying to get into
35:37a home.
35:40Now, Derek, you asked, you challenged the audience.
35:44They rose to the equation.
35:46They rose to the occasion.
35:48What is the value of uploading loans into LoanPass and comparing the eligibility and pricing differences between classic FICO and
35:57FICO score 10T?
36:00To me right now, there's a lot of unknowns in all of this, unfortunately, because it's new.
36:08Everyone's trying to figure out what is this going to mean.
36:11And to me, if I was back in my lending days, I would want data on my loans, my pipeline,
36:19not necessarily national statistics, but what does it mean for me?
36:23Can we make more money, which is probably one of the biggest questions?
36:28Can we close more loans, but can we do it without repurchase requests, you know, early payment default issues coming
36:37in to us as a lender?
36:38So having the ability to get more data now on my loans is what we're trying to provide and what
36:46I would think of as value.
36:49And one thing I'll add there, too, Derek, is, you know, obviously our team talks with all the lenders and
36:55we see different profiles with each lender, right?
37:00Like, so if you're a government lender, you know, or even if you're all VA or you're mainly FHA, USDA,
37:07or you're only conventional or not, everyone is different.
37:10And I think, you know, what's been really astonishing, I shouldn't say astonishing, but what's been really eye-opening for
37:16us is how different pipelines will vary with the scores that they have.
37:21And I think that that truly makes a difference because depending on what price gets back, that depends on how
37:28competitive you are on the street.
37:30And if you want to provide the best pricing to your loan officers, you want to make sure that you
37:35have the ability, they have the ability to compete.
37:37And so knowing how it impacts your business is, I think it's pure gold.
37:43Yeah.
37:48All right.
37:50So the next one that I think we should dive into is wondering the difference between the credit score category
38:03version type options.
38:04Is it only FICO 4 versus FICO 10T comparison available between, or sorry, is it only FICO score 4 versus
38:16FICO score 10T comparison available as the end result?
38:21With specifically the function that we created with FICO, yes, that's what it's doing now.
38:27It's not necessarily FICO 4, that's just the selection I used on this example.
38:31But think of it as classic versus 10T.
38:35That's the comparison it's making right now.
38:37Yes.
38:38Love that question, Allison, because this is something that even before I joined FICO, I was not aware of.
38:44So classic FICO incorporates versions 2, 4, and 5.
38:47So it's all the same model, but they're different versions that were in place at each bureau.
38:52Because at FICO, in order to create the most predictive model, we want to make sure it is in line
38:58with the data that we're actually using to build these models.
39:01And so that is the classic version, which is 2, 4, and 5.
39:06And so to Derek's point, depending on what bureau was able to provide that score, that would drive that.
39:11But when you're looking at them, all classic are the same versus 10T.
39:16Yeah.
39:18Now, I think this is a good clarifying question.
39:22How does a shift in credit scoring model impact the secondary market?
39:30That's a great question.
39:31So remember we started with FICO spec payups, right?
39:34Let's just start there.
39:35That was one of the first questions I asked.
39:36And I love that because now we're ending with this same similar question.
39:40So when an investor goes to buy a FICO spec pool, they're looking at a pool of loans that say,
39:46hey, all the loans in here are 700 and below.
39:49And the reason they pick that certain criteria is based on the prepayment activity or the prepayment speeds of that
39:56type of loan.
39:56And so when you're bringing in a new model, if, like I said earlier, a 740 FICO and a 740
40:03Vantage are not the same, if you are now getting loans that are not that traditional model that you use,
40:09you need to understand how that's going to impact the prepay speeds on that, including the default assumptions.
40:16Because at the end of the day, that is what's going to drive your bid, and that's what's going to
40:21make the pricing, that's what's really going to impact pricing.
40:24So if lenders start seeing different pricing or execution based on the models, that's going to directly correlate to the
40:32pricing they can offer to the borrowers.
40:34And so that's where the secondary market is really driving what happens on the front end.
40:41Yeah, I would agree.
40:43I mean, the secondary market, their job just got a lot harder, unfortunately, because you've got, instead of one variable,
40:50you've got now three that they have to account for, and each one has a different level of risk.
40:56And some of those risks are still unclear.
41:00And so it's going to be some guesswork.
41:02It's going to be a challenge to figure out what do you do, and especially if you, I mean, depending
41:11on how this ends up going, what does an investor do who's buying a loan, who sees all three scores,
41:17and knows that there's variances between them in behavior, how do they treat that?
41:25The whole, it's an interesting time.
41:29I guess that's how I'll finally say this.
41:32Yes, yes, I totally agree there, Derek.
41:35But I think that's why, you know, we're happy to be here, and we're excited to partner with guys like
41:40you, because we're trying to find solutions that will make this transition easier.
41:46Because, again, this has never been done before.
41:49And I, you know, all those, many of those who know the mortgage space know that it takes time, it
41:54takes a lot of time to get things done.
41:56And so the more prepared you are, the better you'll be when, you know, this actual transition is 100%
42:02up and running.
42:06Now, if you were both advising a mortgage lender today, how should they be thinking about risk when evaluating a
42:16new credit score model?
42:18What should they actually be testing to understand how it changes their risk picture before they operationalize it?
42:28I was going to say, I think the answer is different depending on if you are an IMB selling loans
42:35versus a depository that is portfolioing loans.
42:38Because, one, you have the choice of what scoring model you're going to use and how you're going to do
42:44that, how you're going to adjust your risk.
42:45So that's one complete discussion of what are we going to do with our own guidelines.
42:51Then the other is how do we optimize our loan selling to make the most amount of money while also
42:59not increasing our risk of default of early payoff issues.
43:04So two issues there in my mind.
43:08I totally agree.
43:09I think the type of lender you are, whether you're a depository, i.e. credit union or bank, versus just
43:14a pure IMB.
43:16But also, I think, servicing, right?
43:18I think servicing is a big part of the component that folks have not really talked about.
43:24And it's one that I think needs to be addressed because at the end of the day, all servicers know
43:29they're the ones that are going to get stuck with the bag if these loans go bad.
43:33So determining what you're doing with your servicing.
43:36Are you retaining your servicing?
43:37Are you releasing your servicing?
43:39Are you subservicing it?
43:40Are you doing a full service?
43:42All of that matters because the credit score that's being used at origination is what's going to help predict what
43:49happens to that servicing portfolio throughout the course, throughout the life cycle of the loan.
43:54So I think those are some really, really important aspects.
43:59And then just understanding how it plays into your overall execution strategy, right?
44:04If FICO spec pools are a big thing for you, then you really need to understand it.
44:09I mentioned the New York spec payup in one of those.
44:12If New York spec story is a big one for you, understanding that the performance of the score that you're
44:18using for that spec story will translate.
44:22And so I think it just matters on your business.
44:24But those are, I'd say, would be the key factors that folks should be considering.
44:30Great point.
44:32All right.
44:34Well, webinar time runs very fast.
44:37And unfortunately, we are at time for today's conversation.
44:41To our audience, thank you for joining us again for today's conversation.
44:46If we did not have time to get to your questions, I know there were many, we will be passing
44:51them over to Derek and Devin's teams, and they will be able to reach back out to you.
44:56If you want to squeeze any in, I will be staying around a little bit longer.
45:00You can send them, and I will make sure that the FICO team gets them from you.
45:05Devin, Derek, thank you so much for discussing how lenders can evaluate FICO score 10T at scale and better understand
45:13the benefits of more predictive credit scoring for lending decisions, portfolio performance, and borrower access.
45:21We appreciate you all joining us, and we look forward to seeing you at a future HousingWire webinar.
45:28Thank you, Allison.
45:29Thank you for sponsoring.