J.T.

Actuary | Commodity Investor | High Quality Compounder Holder | Long: SPGI, GOOGL, ASML, FICO, AMZN, META, MA, MCO, TSM, Uranium, FMCC

[J.T. @Hold_Quality]

@Iamheartthrob @pulte This MBS security only shows what the lender decided to send the GSE, not what score they paid for (they’re pulling both). The biggest losers of lender’s choice are the GSEs who get lower insurance premiums. The biggest winners are the 720 FICO borrowers that have a 800 Vantage.

[J.T. @Hold_Quality]

@1gregsher @onlinemoney8 @pulte @VantageScore Thanks for your input Greg. I wonder if the MBA will eventually be okay with a duel scoring mandate, but only two bureaus. Btw, keep up with the great podcasts.

[J.T. @Hold_Quality]

@onlinemoney8 @1gregsher @pulte @VantageScore So you feel that the practical move is to just pull both scores?

[J.T. @Hold_Quality]

In case anyone is keeping score, #1 and #4 are happening. I don’t have enough info on #2 and #3.

[J.T. @Hold_Quality]

@ValleyForgeCap Areas where Vantage Score could be penalized relative to $FICO resulting in higher rates for mortgage borrowers:
1. MBS investors concerned about prepayment risk.
2. Banks who hold loan loss reserves.
3. Lenders who hold repurchase reserves.
4. Private mortgage insurance.

[J.T. @Hold_Quality]

@hodlthesetruths @rcwhalen @FICO_corp @VantageScore @nowbammedia I heard and the data seems to suggest that it’s closer to 25bps.

[J.T. @Hold_Quality]

@1gregsher @pulte @VantageScore Greg, this is exactly what’s happening. Lenders can criticize FICO pricing, but their prepayment data and common risk language is worth a lot of money to Wall Street.

[J.T. @Hold_Quality]

@Jbpayne32 @AdvisorJohn Why does Penny do significantly less Vantage volume compared to UWM?

[J.T. @Hold_Quality]

@cloneinvestor @MichaelHuynh96 There’s still massive gaming btw.

[J.T. @Hold_Quality]

Sigh of relief $FICO

[J.T. @Hold_Quality]

@cloneinvestor This does not appear to be the case. It makes sense that a fair LLPA grid for Vantage would demand higher scores since the distribution of scores for Vantage tend to be hire. Per Milliman:

[J.T. @Hold_Quality]

@cloneinvestor First let me just say there’s no one to one mapping. The FICO - 20 is a *reasonable* mapping. The reason I said this is a sigh of relief is because the FHFA could have, for whatever reason, made the LLPA grid such that more home buyers getting a lower LLPA fee with Vantage.

[J.T. @Hold_Quality]

@DeepIceValue It’s up because the Vanatge Score LLPA grid dropped and it’s not inherently favorable to Vantage Score. It’s basically treated as Classic FICO - 20. That’s was one way for the FHFA to massively screw FICO and it didn’t happen.

[J.T. @Hold_Quality]

@SubprimeCap That they are. However, only an MBS trader or an aggregator selling the MBS would know. This doesn’t really matter since any hedging team worth their salt would price pricing disparities at the loan level.

[J.T. @Hold_Quality]

@SubprimeCap Idk what you mean by spread compression. There is a spread and it will likely persist for some time… years at least. The spread exists on loans coming from the same lender. As for commingling loans inside MBS, I would guess…

[J.T. @Hold_Quality]

@RobTVDC @dayetweets @pulte Which credit score has 25+ years of prepayment behavior behind it? Only one. The accuracy of the probability of default is not a big concern since agency MBS has basically no credit risk. Prepayment modeling is what everyone cares about. Cheers 🍻

[J.T. @Hold_Quality]

@dayetweets @RobTVDC @pulte Has an economic value add of several thousand dollars.

[J.T. @Hold_Quality]

@dayetweets @RobTVDC @pulte Daye, I think you and Rob agree that a couple is paying $60 at least to FICO. Direct licensing, as you point out, can reduce the bureaus 100% markup as well as credit reseller markups. I think what’s missing in the pricing conversation is the fact that $FICO as probably…

[J.T. @Hold_Quality]

@dayetweets @RobTVDC Daye, I disagree with your framing. I’m sure some lenders see Vantage as the Temu score, but the reality is that secondary market pricing drives the bus, not lender preference.

[J.T. @Hold_Quality]

@NotJanetYellen7 So you think lenders will pay for two separate tri merge reports in some cases?

[J.T. @Hold_Quality]

@10x_FCF Willing to eat the spread just to win that business.

[J.T. @Hold_Quality]

@10x_FCF Yes, the majority of Vantage loans are in the highest tier. Again, this goes back to the lower LLPA fee associated with this. This is why Lancing calling Vantage the “gaming” score is not disingenuous. Also given that rockets spread is 11bps, it could mean that UWM is more…