Fair Isaac shares fell 16.7% in morning trading on Sept. 4 after Federal Housing Finance Agency Director Bill Pulte directed Fannie Mae and Freddie Mac to approve all lenders for VantageScore use, ending a prior 50-lender pilot limit, according to Barron's. The move broadened access to an alternative credit score for lenders selling loans to the government-sponsored enterprises.

Pulte removes VantageScore limit

The directive turns what had been a restricted rollout into availability for all approved lenders. Fannie Mae had said in April that VantageScore 4.0 was available through a limited rollout, while lenders outside that group would continue using Classic FICO pending broader availability.

That broader access is now central to the market reaction in Fair Isaac, whose FICO scores have long been used in the enterprises' mortgage processes. Fannie Mae's announcement described the earlier arrangement as a limited rollout rather than an across-the-board lender option.

Lenders can choose between two scores

Under FHFA policy, approved lenders can choose either Classic FICO or VantageScore 4.0 for loans sold to Fannie Mae and Freddie Mac. The policy retains the tri-merge reporting requirement, meaning lenders must continue to obtain credit reports from all three nationwide consumer reporting agencies.

The choice changes the operating framework from one in which access to VantageScore was limited to a defined lender group. It does not eliminate Classic FICO from the enterprises' credit-score options. The FHFA's credit-score policy sets out both the score options and the continuing tri-merge requirement.

FICO had identified enterprise adoption risk

Fair Isaac had previously warned investors that a loss or reduction in Fannie Mae and Freddie Mac use of its scores could materially affect its revenue, operating results and stock price. The broader VantageScore approval gives lenders a choice that bears directly on that disclosed risk, though the available information does not establish how many lenders will use either score.

In its investor disclosure, FICO specifically identified reduced enterprise usage as a potential material risk to its business and shares.

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