CrossCountry adopts FICO Score 10 T for non-conforming loans, MBS issuances

Ohio-based mortgage lender CrossCountry Mortgage has adopted the updated credit scoring model FICO Score 10 T to support origination of non-conforming loans and issue mortgage-backed securities (MBS), the company announced on Tuesday. 

The lender’s move follows Movement Mortgage’s decision in early October to become an “early adopter” of the updated credit scoring model that FICO released about four years ago. Other mortgage lenders may follow suit since regulators plan to replace the classic credit system with an updated one to incorporate trended data. 

CCM claims it is “the first mortgage lender to commit to issuing MBS exclusively based on FICO Score 10 T,” a step for investors at the $12 trillion MBS global market “to familiarize themselves with the new score and realize the promised performance improvement.”

According to Jenn Stracensky, CCM’s chief operating officer, “By proactively issuing mortgage-backed securities exclusively based on FICO Score 10 T,” the company empowers “investors to make smarter decisions.”

The move will also help the company to “continue to offer personalized solutions to our customers,” Stracensky said in a statement. 

Fair Isaac Corp. (FICO), the company that retains the rights to the market’s adopted methodology to measure consumer credit risk, launched the updated credit score in 2020 for lenders to have greater precision by incorporating trended credit bureau data when making lending decisions. 

The company claims the model can expand mortgage approval rates by up to 5% relative to classic versions without adding incremental risk. It reduces default risk and losses by up to 17% and allows lenders to project cash flows more accurately, FICO says. 

Government-sponsored enterprises Fannie Mae and Freddie Mac have relied on the classic credit models for nearly 20 years. 

However, the Federal Housing Finance Agency announced in late 2022 that it would replace the Classic FICO credit model with the FICO 10 T and VantageScore 4.0, a competing model incorporating trended credit bureau data. 

The original implementation timeline was to move from a tri-merge system to a bi-merge system in the first quarter of 2024. But, concerns expressed by stakeholders and members of the U.S. Congress delayed the transition.  

Amid a discussion on changing the credit scoring model, HousingWire reported in December that credit reports will be more expensive for mortgage lenders in 2024. 

FICO will charge one price – higher than the current price – to all mortgage lenders, independent of their volumes, departing from the tier-based pricing structure it implemented in early 2023. It will also collect the same per-score price for soft pulls and hard pulls, an initiative that started in 2023 despite significant differences in these products.