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Bill Pulte had himself a Wednesday night on X.
The FHFA director fired off a string of credit-related announcements, some fairly incremental, others potentially much more consequential if they actually make their way through the mortgage plumbing.
The headline is that VantageScore 4.0 is now available to every approved GSE lender. But I think one of the more intriguing consequences is getting a little overlooked: Eventually, Wall Street is going to have enough data to decide whether a VantageScore loan actually behaves differently from a FICO loan. And if it does? Investors will price it.
In today’s Scoop, we dig into the VantageScore experiment, including some pretty interesting early loan-level differences. Plus, retail IMBs are still writing very large checks for LOs, there’s some unusual stuff happening inside Fannie, & we’ve got a fresh batch of scoops.
What's On Tap - Sept. 11
Quickies 👀
AnnieMac has landed a good chunk of production lately. The NJ-based IMB recruited Michael Clark & his team from PRMI & recently nabbed a roughly $700M team from Union Home Mortgage.
Mortgage-tech sales leader Brandon Kirby has left nCino. The company installed Keith Kettell as CRO a few months back.
Goddamnit, we’re back to a 7-handle. With the 10-year at 4.95% as of this writing, mortgage rates are well above 7% on Mortgage News Daily. There have been only a handful of trading days since ’07 when the 10-year has been higher.
Related: How long can this ARM pricing hold? I’m just glad I locked a 5.37% 7/6 ARM a few weeks ago on the Brooklyn condo…
James Duncan is the new chief growth officer at AskBobAI, the result of a consulting engagement that turned into a partnership. Duncan will lead strategic growth initiatives while continuing his consulting work through Caelum Advisers.
There are two kinds of families: Turkey Trot families & normal families. On that note, in the good ol’ days, FHFA would announce the new conforming loan limits around Thanksgiving & lenders would react. Now lenders get out way ahead of the regulator. Rocket is first this year, announcing a $845K single-unit limit in the Lower 48.
Halsey will be Freedom Mortgage’s musical act in Chicago for MBA Annual. Tremendous news for the millennials. I would, however, like an over/under on the percentage of boomers in attendance who can name a single Halsey song.
There’s an 85% chance the Fed hikes rates next week, according to rate-market pricing. What a fun time to originate mortgages!
Anyone want to buy a ~$100M New England mortgage shop that does manufactured housing? One is for sale, per my sources. Bonus points if you can guess the company.
The MyUtilities annual dove hunt 🕊 🪦 took place Thursday in Texas. The vendor did not invite Dick Cheney, which historically would have made this a considerably more exciting event. (Also, he died last year.)
Next week I’ll publish a deep dive into exactly how Rocket & UWM are strategically using VantageScore. It’ll be exclusively for paid subscribers.
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Maybe you should take the signing bonus 💰
The mortgage market may be ugly, but top retail shops are still throwing serious dollars at producers.
NAF recently offered a $1M signing bonus to a roughly $160M producer, according to sources. And you don’t have to be a monster producer to get a check: A different SoCal-based lender even offered one $4M producer $40K, a source told me Thursday.
Why take the money now? “I think people are taking the money b/c they don’t think they’ll make the volume in the next three years,” one source said.
That’s also why some lenders are stretching these deals to four- or five-year terms. They’re effectively front-loading the comp & betting they can earn it back in the out-years.
“It’s a Rent-an-LO market,” one recruiter said w/ a cheeky grin.
How many lenders wrote gigantic checks 12 or 18 months ago based on production assumptions that now look…uhhh optimistic? And how many LOs happily pocketed those checks only to discover that once you’re locked into a multiyear deal, the economics can start changing around you? Maybe your margin creeps higher. Maybe the support isn’t what you expected. Maybe the market gets worse.
A $1M check is still a $1M check & I am personally quite pro-receiving-$1M-check. But free money in mortgage is rarely actually free.
VantageScore Is Live. Almost Nobody’s Using It.
The VantageScore pilot has been live w/ America’s largest lenders since April. Here’s what the leaderboard looks like:
There are really just two lenders producing meaningful VS4.0 volume today. Opening VantageScore to every approved Fannie & Freddie lender should broaden adoption, but I wouldn’t expect the floodgates to open overnight.
As I’ve previously reported, there are LOS issues, credit-vendor issues & plenty of other mortgage plumbing that has to get sorted before lenders can simply flip a switch. That helps explain why a pilot featuring some of America’s largest mortgage companies has mostly turned into a Rocket/UWM experiment. Buuuut the experiment is scaling pretty damn fast. According to Milliman, VantageScore went from essentially nothing this spring to roughly 5.6% of August GSE issuance. It’s not universal adoption, but it’s not nothing, either.
Credit: Milliman
The 20-point haircut ✂
Pulte also finally debuted the LLPA matrix for VantageScore loans. Both Classic FICO & VS4.0 use the familiar 300–850 scale, but Fannie & Freddie are not treating identical numerical scores as equivalent for pricing. Instead, the VantageScore LLPA buckets are effectively shifted 20 points higher. The best purchase pricing tier, for example, begins at 780 under Classic FICO but 800 under VS4.0. There’s some logic behind that.
The early agency book shows VantageScore loans carrying headline credit scores roughly 20 points higher than the Classic FICO book. In August, the weighted-average VS4 score was roughly 778, versus 756 for Classic FICO. Check out the stats, also courtesy of Milliman:
Credit: Milliman
The VantageScore loans look…different 👗
The early VS4.0 book doesn’t look exactly like the Classic FICO book.
Some of the differences we saw at the beginning are already fading as volume grows. Loan sizes have largely converged & LTVs are getting closer. The first VantageScore borrowers were extremely clean credit-wise, which makes sense for a controlled rollout of a brand-new scoring model.
Credit: Milliman
But one pretty striking difference has stuck around: cash-out refis.
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