Mortgage credit-score hopeful VantageScore has a new CEO

The credit model developer is participating in an FHFA process to determine if it could score agency-backed mortgage borrowers

VantageScore Solutions announced this week its longtime CEO Barrett Burns would step down and Silvio Tavares, a financial services and fintech veteran, will fill the role.

Tavares has held senior positions at Visa and Fiserv\First Data, and most recently led the Digital Commerce Alliance, a global trade association which counted Bank of America, Discover, MasterCard and Microsoft among its members. Burns will stay on as vice chairman, a newly created position at VantageScore.

Tavares’ new role as CEO comes at a time of great opportunity for the company, which develops consumer credit scoring models. It awaits the conclusion of a years-long process at the Federal Housing Finance Agency to determine whether its model could be used for mortgages the government sponsored enterprises buy. Currently, the GSEs use FICO’s credit score model.

In 2019, the FHFA launched a process to assess new credit scoring models for use by the GSEs. The initial version of its rule would have excluded credit score models “developed by a company that is related to a consumer data provider through any common ownership or control.” That would have ruled out VantageScore, since it is owned by TransUnion, Experian and Equifax. The final version of the agency’s rule, however, had no such exclusionary language. VantageScore’s model is currently under review by the FHFA.

Earlier this year, the Wall Street Journal reported that VantageScore had passed the agency’s credit-score assessment for accuracy, reliability and integrity. The next hurdle for the model is the FHFA’s enterprise business assessment, which will look at the accuracy and reliability of the credit score model within the GSEs, how the model could impact fair lending, its potential competitive effects, an assessment of the model provider as a potential vendor, as well as how it could impact the mortgage finance industry and GSE operations and risk management. That phase will be completed within eight months.

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In the meantime, VantageScore is keenly aware that, were its model to be approved by the regulator, it could help the FHFA push forward the Biden administration’s agenda of extending credit to underserved and minority communities. VantageScore claims its model can score 96 percent of all adults 18 years and older in the United States without sacrificing safety and soundness standards, many of whom are “credit invisible” in the eyes of other credit scoring models.

Tavares also said that using the score would provide a way for investors to make good on promises to pursue environmental, social and governance investments.

“Every company in America, every bank, every lender, wants to stand for something more than just delivering earnings per share,” Tavares said. “We at VantageScore have a unique market position in that we’re the S in the ESG. As regulators allow mortgage issuers to securitize [mortgages that use] VantageScore, it will give an opportunity for investors to invest in that S in ESG.”

Although it’s unclear what the result of the assessment will be, there are other signs that the FHFA is thinking about credit differently. In an interview with National Housing Conference CEO David Dworkin, FHFA Acting Director Sandra Thompson said that other factors, such as cell phone bills, should be taken into consideration in underwriting. She also hinted at bigger changes in how credit decisions are made.

“At the end of the day we all want to make sure that credit is given to credit-worthy borrowers, and how we look at credit needs to change,” said Thompson. “We’re really being thoughtful about that.”

In that interview, Thompson also highlighted the inclusion of positive rental payment in Fannie Mae’s underwriting system, a change which Tavares said “brought a big smile” to his face. Rental payments is one of the predictors VantageScore’s model uses.

“Imitation is the most sincere form of flattery,” said Tavares.

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