FHLBank Topeka Expands Mortgage Collateral Options to Accept VantageScore 4.0
Key Takeaways
- •FHLBank Topeka's 637 member institutions can now pledge mortgage collateral underwritten with VantageScore 4.0 as an alternative to Classic FICO.
- •Pledged loans act as security for the liquidity FHLBanks provide, so accepting VantageScore-underwritten loans expands the collateral that can back member funding.
- •VantageScore 4.0, launched in 2017 by a joint venture of Equifax, Experian and TransUnion, applies machine learning and trended data, including rental payments excluded from traditional models.
- •The model can score consumers with thin or no traditional credit, positioning lenders to serve creditworthy buyers historically left out of conventional credit assessments.
- •CEO Jeffrey Kuzbel framed the change as an addition to tools like down payment assistance grants and reduced-rate mortgage programs aimed at making homeownership more attainable.
FHLBank Topeka announced that its 637 member financial institutions can now pledge mortgage collateral underwritten with VantageScore credit scores as an alternative to the Classic FICO credit score model. The decision carries weight beyond scoring policy: regional FHLBanks provide liquidity to member lenders, and the loans members pledge serve as the security for that funding, so the range of eligible collateral shapes how lenders can finance the mortgages they originate.
By factoring in rental payments and other consumer credit data that are not included in traditional scoring models, VantageScore 4.0 is designed to expand access to mortgage credit and support sustainable homeownership, according to the announcement.
The expanded eligibility of one- to four-family residential mortgage collateral that member institutions can pledge to FHLBank Topeka is intended to promote mortgage lending to creditworthy homebuyers who have historically been left out of conventional credit models. With an additional scoring model now accepted for pledge eligibility, members are positioned to align the collateral they post with the underwriting standards they use.
“FHLBank Topeka is proud to expand our mortgage collateral options by adding another acceptable credit scoring model,” said Jeffrey Kuzbel, President and CEO of FHLBank Topeka. “Adding to other innovative tools like our down payment assistance grants, reduced-rate mortgage programs and housing bond investments, this enhancement reflects our ongoing commitment to making homeownership more attainable.”
Background
The Federal Home Loan Bank System, established by Congress in 1932, comprises 11 regional government-sponsored enterprise banks that provide liquidity to member lenders supporting housing finance and community development. FHLBank Topeka is one of these regional banks.
VantageScore 4.0, introduced in 2017 by VantageScore Solutions — a joint venture of the three nationwide credit bureaus, Equifax, Experian and TransUnion — incorporates machine learning and trended credit data. The model can generate credit scores for many consumers with limited or no traditional credit histories, a population often underserved by conventional scoring approaches. That scoring reach is what ties the model to collateral eligibility, since loans underwritten with it can be pledged by members drawing on the Bank's liquidity.
More information is available on the FHLBank Topeka website.
Source: GlobalFinTechSeries
