The housing finance industry has reached a milestone with the launch of the first government-backed mortgage-backed security (MBS) that includes loans evaluated using FICO Score 10 T.
Launch Announcement
On December 3, Cardinal Financial made waves by announcing the introduction of this cutting-edge MBS, which exclusively comprises loans guaranteed by the U.S. Department of Veterans Affairs (VA).
FICO Score 10 T utilizes a trended data approach, providing lenders with a deeper understanding of borrowers’ credit behavior over time, ultimately refining risk assessments.
The first transactions related to this MBS took place on November 25.
Industry Reactions
Joe Zeibert, vice president of mortgage and capital markets at FICO, shared his excitement regarding the incorporation of FICO Score 10 T into this groundbreaking security.
He emphasized that this innovation not only enhances lending practices but also has positive implications for the communities supported by these financial organizations.
Zeibert urged mortgage investors to consider the advantages of integrating FICO Score 10 T into their operations.
Cardinal Financial’s Leadership
Cardinal Financial has emerged as a leader in the adoption of FICO 10 T, especially regarding its nonconforming loan offerings.
In October, the lender began leveraging this credit evaluation model for VA loans, joining a cohort of over 20 mortgage lenders nationwide that are using FICO 10 T for loans outside of Fannie Mae and Freddie Mac’s purview.
The credit model updates were unveiled in October 2022, and the FHFA signaled its intention to implement both FICO 10 T and VantageScore 4.0 revisions by the end of 2025.
Headquartered in North Carolina, Cardinal Financial revealed that most of its clients saw improvements in their credit scores under FICO 10 T. This progress has enabled the lender to offer more favorable loan conditions while maintaining a steady level of credit risk.
Michael Gaines, the senior vice president of capital markets at Cardinal Financial, remarked that this latest initiative underscores the company’s dedication to enhancing credit risk assessment.
By adopting FICO Score 10 T, Cardinal Financial intends to improve transparency in credit risk for investors while broadening access to homeownership for veterans and military personnel.
Source: Housingwire