The Federal Housing Administration confirmed on Thursday its intention to adopt FICO 10T along with VantageScore 4.0 as eligible credit scoring models for FHA-insured mortgage underwriting, in addition to the industry mainstay Classic FICO model.

“FHA will continue to require the use of a tri-merge credit report, ensuring a comprehensive and consistent evaluation of borrower credit information across all acceptable scoring models and supporting prudent risk management,” it stated in an industry memo shared with Scotsman Guide by the Consumer Data Industry Association (CDIA), a trade association that represents the three major credit bureaus.

FHA, a division of the Department of Housing and Urban Development, issued the message a month after Federal Housing Finance Agency Director Bill Pulte, at a joint press conference with HUD Secretary Scott Turner, announced that a limited rollout of VantageScore 4.0-underwritten mortgages would be eligible for delivery to Fannie Mae and Freddie Mac.

In a statement on Friday, the CDIA applauded the FHA’s decision.

“FHA made the right call. The tri-merge credit report exists for a reason — it promotes data accuracy, market competition and investor confidence,” commented Dan Smith, CDIA’s president and CEO, “and it protects borrowers by ensuring that lenders have the most complete picture of creditworthiness before making one of the most consequential financial decisions of a consumer’s life.”

“Today’s guidance confirms what CDIA has long maintained: more data, not less, is the foundation of a sound mortgage market,” Smith added. “Requiring tri-merge reports across all acceptable scoring models ensures consistency, reduces risk and preserves the integrity of the credit evaluation process for lenders, investors and borrowers alike.”

Tri-merge refers to credit reports that pull data from all three of the major credit bureaus. While some industry stakeholders, such as the Community Home Lenders of America, have been staunch defenders of the tri-merge framework, other trade groups — including the Mortgage Bankers Association and the Broker Action Coalition (BAC) — have advocated for a single-pull model.

A representative of BAC told Scotsman Guide that the advocacy group “appreciates FHA’s willingness to implement updated credit scoring models that will expand homeownership opportunities and improve outcomes for consumers who were not properly evaluated under legacy models.”

While BAC said it understands the decision to maintain the tri-merge requirement, “we hope the agency will continue to explore additional reforms to address the rapidly rising cost of credit reports, including both single-bureau and portable credit proposals.” The latter proposal from BAC refers to a consumer-controlled credit report model that would let prospective borrowers purchase their report and provide it to multiple lenders.

In its statement, the FHA said the move to accept both FICO 10T and VantageScore 4.0 models “can catalyze long-delayed competition, reduce systemic dependency on a single legacy model, encourage pricing discipline in the credit reporting market, and better reflect contemporary consumer credit behavior.”

The FHA said implementation dates and additional guidance will be announced later this year.

Kimber White, president of the National Association of Mortgage Brokers (NAMB), told Scotsman Guide he was glad to see the alignment, and that he hopes increased competition in the credit scoring market will lower the cost of credit reports. He added that it could help first-time homebuyers qualify “that fell a little short under the standard FICO model.”

“NAMB has long championed credit scoring reform as a critical component of expanding homeownership access and reducing costs for American borrowers,” White commented in an email. “This confirmation is a direct result of sustained industry advocacy.”