Key facts
- About 25% of UWM borrowers are seeing better credit results with VantageScore 4.0.
- UWM expects this share to reach two in five borrowers by month-end.
- VantageScore 4.0 incorporates additional data and trending behavior for credit assessment.
- FHFA applies adjustments to VS4 at 20 points higher than FICO for pricing.
- Bank of America Securities data shows $8.6 billion in VS4 loan originations since April.
- UWM and Rocket Mortgage account for roughly 98% of VS4 loan originations.
United Wholesale Mortgage (UWM) has reported that its early adoption of the VantageScore 4.0 (VS4) credit scoring model is positively impacting approximately 25% of its borrowers. The company anticipates this figure could increase to two in five borrowers by the end of the current month. This shift is occurring without any changes to UWM's lending standards, potentially leading to improved loan-level price adjustments (LLPAs), reduced mortgage insurance costs, and expanded loan eligibility, including converting declined applications to approved ones.
Mat Ishbia, UWM president and CEO, stated that the addition of VS4 has been a significant positive development, contributing to the expansion of homeownership. Data from Bank of America Securities indicates that since the rollout program began in April, around $8.6 billion in loan originations have included VS4, with UWM and Rocket Mortgage accounting for approximately 98% of this volume. BofA's analysis suggests UWM is focusing on more sophisticated borrowers, while Rocket Mortgage is concentrating on cash-out refinance loans.
Progress in VS4 adoption has been slow among other lenders, with only a few, such as AmeriSave and Pennymac, issuing loans on a sporadic basis. Analysts cite execution risks and limited near-term upside as potential reasons for this slow uptake. Many lenders also face complexity due to reliance on external pricing engines and loan origination systems.
VantageScore 4.0 assesses credit management over time by incorporating additional data and trending behavior, unlike static point-in-time information. According to the FHFA's grid, VS4 adjustments are applied 20 points higher than FICO scores. However, a slightly higher VS4 score alone may not alter loan economics. BofA's historical data analysis suggests that a borrower typically needs a VS4 score at least two pricing tiers above their FICO score to secure a better rate, assuming all other factors remain equal. For instance, a borrower with a 700 FICO and a 720 VS4 might see the same pricing, whereas a 740 VS4 could qualify for a lower rate.