Freddie Mac Securitizes First Mortgages Using New VantageScore Model

Freddie Mac has successfully securitized approximately $10 million in mortgages originated by Newrez using the VantageScore 4.0 credit model. This transaction marks a significant step in the mortgage industry's transition toward updated credit scoring models, signaling that the secondary market is ready to embrace alternatives to traditional FICO scores.

The move is part of a broader federal mandate requiring government-sponsored enterprises to modernize their credit score requirements. VantageScore 4.0 is designed to provide a more comprehensive view of a borrower's creditworthiness by including trended data and accounting for consumers with thinner credit files. By successfully bundling these loans into securities, Freddie Mac is demonstrating the viability of these new models for investors.

While the $10 million initial pool is small compared to the trillion-dollar mortgage-backed securities market, it serves as a critical proof of concept. Industry analysts will be monitoring how these loans perform over time compared to those scored with legacy systems. Lenders and investors alike are watching for potential shifts in approval rates and risk assessments as the industry moves away from a decades-long reliance on older scoring methods.

This development highlights the ongoing push for greater inclusivity in the mortgage market, as modernized scoring aims to provide more accurate credit assessments for a wider range of potential homeowners.

Reporting by HousingWire.