Fair Isaac shares plunge as housing regulators push for a unified pricing framework

Reuters, September 29 - On Tuesday, shares of Fair Isaac (FICO.N) plunged sharply after the U.S. federal housing regulator said it is studying changes (link) to how credit reporting is used in order to lower borrowing costs, threatening FICO's long-held dominance in the U.S. mortgage credit scoring market.

Federal Housing Finance Agency Director Bill Pulte said in a post on social media platform X that mortgage finance companies Fannie Mae and Freddie Mac will switch to a unified pricing system that incorporates both VantageScore and FICO scores, effectively putting the two rivals on equal footing.

• On Tuesday, shares of Fair Isaac plunged 27%, falling to their lowest level since January 2023 and set to post their biggest single-day drop since May 1989.

• The FICO score is considered the standard for banks, credit card issuers, and mortgage and car loan companies to assess consumer credit risk, while VantageScore is a competing scoring model jointly developed by Equifax (EFX.N), Experian (EXPN.L), and TransUnion (TRU.N).

• Fair Isaac has not yet responded to Reuters' request for comment.

• Deutsche Bank analysts said in a report: "On this alone, it could result in more mortgages getting better pricing under VS4 (VantageScore Model) than under FICO Classic."

• Rocket Mortgage, a subsidiary of Rocket Companies (RKT.N), announced Monday that it will become (link) the first mortgage lender to use VantageScore 4.0 as the preferred scoring model for all eligible loans.

• "For FICO, the worst-case scenario is that Rocket Mortgage will completely stop using FICO credit scores whenever eligible," the analysts added.

• On Tuesday, shares of Equifax and TransUnion fell 3.2% and 5%, respectively, while London-listed Experian shares dropped 1.8%.

• Pulte has repeatedly accused FICO of unreasonably driving up consumer costs and announced earlier this month that he had directed Fannie Mae and Freddie Mac to approve (link) all lenders to use VantageScore.

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