United Wholesale Mortgage (UWM)’s early adoption of VantageScore 4.0 is shifting outcomes for one-quarter of its borrowers, the company said. It aligns with analysts’ estimates based on historical data.
UWM said about 25% of its borrowers are currently seeing a more advantageous credit result when using the new model instead of a Classic FICO score. This potentially equates to better loan-level price adjustments (LLPAs), lower mortgage insurance costs, expanded loan eligibility and, in some cases, converting a declined application into an approval.
The company expects that share could reach two in five borrowers by the end of this month. The impact comes without changing lending standards, UWM added.
“The addition of VS4 has been one of the best things that has come from FHFA (Federal Housing Finance Agency) in many, many years,” Mat Ishbia, UWM president and CEO, said in a statement. “This is what expanding homeownership actually looks like.”
Limited adoption so far
Since a rollout program program began in April, the market has seen about $8.6 billion in loan originations that include VS4, according to data from Bank of America Securities. Roughly 98% of that total, however, has come from UWM and Rocket Mortgage.
BofA’s analysis shows that VS4 loan characteristics vary by lender strategy. UWM appears to be more focused on what the bank describes as savvier borrowers, while Rocket appears more focused on cash‑out refinance loans.
Beyond UWM and Rocket, VS4 progress has been slow. According to the analysts, a small group of other lenders, including AmeriSave and Pennymac, have issued VS4 loans on a sporadic basis but not in meaningful volume so far.
Analysts point to both execution risk and limited near‑term upside. So far, Rocket’s and UWM’s overall origination market shares have remained stable. And many lenders rely on external pricing engines and loan origination systems, which adds another layer of complexity.
Pricing differences
VS4 incorporates additional data and trending behavior to assess how consumers manage credit over time, rather than looking only at static point‑in‑time information.
In terms of pricing, according to a grid released by the FHFA, adjustments designed for FICO are applied to VS4 at 20 points higher. The top purchase tier for FICO remains 780 and above, which now aligns with an 800‑plus VS4 bucket.
Under the current LLPA grid, however, a slightly higher VS4 score is not enough on its own to change economics. According to the BofA analysis — which is based on historic data, when only Classic FICO was delivered — with all else equal, a borrower generally needs a VS4 score at least two pricing tiers above their FICO score to get a better rate.
For example, a borrower with a 700 FICO and a 720 VS4 would typically see the same price, while a 740 VS4 could qualify for a lower rate.
Assuming lenders and borrowers stick with FICO when pricing is equal and only use VS4 when it delivers a better rate, historic data implies that roughly 25% of borrowers would opt for VS4. If borrowers instead choose VS4 whenever the rate is at least as good as FICO, the share could rise toward 50%, BofA said.