KBRA Releases Research – VantageScore 4.0 Adoption—RMBS Credit Paradigm Shift?

NEW YORK--(BUSINESS WIRE)--KBRA releases research commenting on the Federal Housing Finance Agency's (FHFA) July 8 announcement that lenders may now use VantageScore 4.0 (VS4) for mortgages sold to government-sponsored entities (GSE) Fannie Mae and Freddie Mac.

In the report, KBRA revisits its July 2024 research on the historical loan-level VantageScore 4.0 data released by the GSEs, highlighting key considerations for mortgage market participants as the new model becomes available for underwriting and delivery.

The commentary includes the following key takeaways:

• Score Mapping: While both models share a 300-850 scale, VantageScore 4.0 systematically scores borrowers higher than classic FICO, particularly in the mid-score ranges (e.g., 625-750).
• Inclusivity: VS4 expands the scorable population by leveraging data and algorithms that allow it to score consumers with less than six months of credit history.
• Predictive Power: For rank-ordering borrower credit risk—particularly for loans that became nonperforming—VS4 and classic FICO both performed effectively, with slight advantages in granularity observed in VS4 for lower-score borrowers.

KBRA will continue to monitor the implementation of VantageScore 4.0 and provide updates as additional guidance becomes available.

Click here to view the report.

Recent Publications

• GSEs Release Historical VantageScore 4.0 Data
• FHFA’s Credit Score Proposal and Its Impacts on RMBS

About KBRA

KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

Doc ID: 1010319