A shift is happening in mortgage lending and it could change how millions of borrowers qualify for home loans.

I'm Kathy Fedke and this is real estate news for investors.

This is Real Estate News with Kathy Fedke.

The mortgage industry is beginning to test newer credit scoring models that may expand access to financing.

But lenders and investors are also warning that the transition could create new risks if those scores are not calibrated correctly.

The Federal Housing Finance Agency is currently testing expanded use of Vantage Score 4.0 with select lenders.

Vantage Score 4.0 is a newer credit scoring model designed to predict how likely someone is

to repay their debt. It's similar to a traditional FICO score, but it uses more modern data

and looks at consumer behavior differently. FICO 10T is also expected to become an approved

option in the future, alongside the traditional FICO classic model. HUD Secretary Scott Turner has

also signaled that FHA loans could eventually adopt these newer credit scoring systems. For decades,

mortgage underwriting has relied mostly on older credit

scoring models that look at a borrower's credit profile at a single point in time. The newer

systems are different. They analyze payment trends over time, credit utilization patterns,

and in some cases, rental payment history. Supporters say that could give lenders a more

complete picture of a borrower's financial behavior. That may also help some borrowers

qualify who were previously overlooked by traditional models, especially renters and younger

consumers with limited credit history. But lenders are finding that the same borrower can receive very different scores

depending on which model is used.

In some cases, the gap can be 40 to 80 points.

And in mortgage lending, that can dramatically impact pricing, approval odds, and risk calculations.

Some participating lenders are reportedly using temporary

...