A single pricing grid wipes out the discount VantageScore carried, and analysts split on how deep the damage runs.
Fair Isaac Corp. shares fell about 26.5% on Tuesday after the federal housing regulator ordered Fannie Mae and Freddie Mac to stop charging borrowers more for loans scored by the company's chief competitor.
Federal Housing Finance Agency Director Bill Pulte announced the change in a post on X on Monday night. "Instead of two separate pricing grids, which makes zero sense, Fannie and Freddie are hereby moving to ONE PRICING GRID with VantageScore joining the existing FICO Classic pricing grid," he wrote.
The mechanics are narrow but consequential. Earlier this month the two mortgage giants began accepting either Classic FICO or VantageScore 4.0 on eligible conventional loans. Their pricing grids, however, knocked 20 points off every VantageScore result, on the theory that the rival model made borrowers look safer than they were. That discount made VantageScore more expensive to use. The single grid removes it.
The reversal at the heart of the selloff
What makes the decision unusual is its timing. The 20-point adjustment was the regulator's own risk estimate, published barely two weeks before it was dropped. TD Cowen analyst Jaret Seiberg zeroed in on that point. "FHFA as far as we can tell has not explained why it now views FICO and Vantage Scores as the same when just two weeks ago it released grids that concluded that Vantage Score overstated credit quality by about 20 points relative to FICO," he wrote.
Seiberg argued the consequence is effectively "an across the board cut in loan level pricing adjustments," because most borrowers will be able to qualify for better terms using VantageScore. He also raised a problem for the mortgage giants themselves: "If one believes the prior grids accurately measured risk, then this means Fannie and Freddie are taking on more risk with each Vantage Score loan without being compensated." Fannie Mae's over-the-counter shares fell about 5.2%.
The case that the damage is contained
Not everyone sees a broken franchise. RBC Capital Markets analyst Ashish Sabadra kept an Outperform rating and a $1,525 price target. He flagged two real risks: lenders "score shopping" for whichever model gives the better price, and pressure on FICO to rethink the per-pull fees it charges on every mortgage score.
Several features of the market also limit the exposure. Classic FICO remains mandatory for manually underwritten loans, and jumbo and investment-property mortgages remain tied to it for now. The mortgage giants have yet to clear FICO's newer 10T model for loan deliveries, an approval still ahead that keeps the company inside the modernization process. And investors who buy mortgage-backed securities still want to see a FICO score. "What limits risk to FICO is the MBS market, which wants the FICO score," Seiberg noted, which suggests many lenders will keep paying for both.
Questions about scoring incentives
Both analysts raised a longer-term worry: that score providers will now compete to produce the lowest pricing adjustments rather than the most accurate default predictions. "We do not see how that benefits housing," Seiberg wrote.
What to watch
The FHFA has not set a date for the single grid to take effect, and the practical bite depends on when lenders can act. The decisive number, how much order volume actually shifts from FICO to VantageScore, will not be visible until the company next reports. Fair Isaac has not commented publicly.