Federal Home Loan Bank of San Francisco Now Accepts Mortgage Collateral Using VantageScore 4.0 – Expanding Number of Diverse and Creditworthy Mortgage Applicants

FHLBank San Francisco Member Financial Institutions Can Now Originate More Loans for Underserved Borrowers to Close the Racial Homeownership Gap

SAN FRANCISCO, February 12, 2024 — The Federal Home Loan Bank of San Francisco (FHLBank San Francisco) and VantageScore announced today that FHLBank San Francisco will now accept mortgage collateral originated by lenders using VantageScore 4.0 credit scores, which considers rental payments and other data points into its scoring algorithms that are not included in traditional scoring models, ushering in an innovative solution aimed at closing the racial homeownership gap. By expanding the kind of mortgage collateral eligible to be pledged by member financial institutions borrowing from FHLBank San Francisco, lenders will be able to increase the amount of creditworthy mortgage applicants and include many underserved borrowers left out by conventional models. VantageScore estimates that using the VantageScore 4.0 credit model will result in approximately 33 million more consumers nationwide having access to a credit score that may aid them in obtaining a mortgage; including an estimated 5.5 million consumers within the FHLBank’s regional footprint of Arizona, California, and Nevada. 

“We know there are millions of creditworthy borrowers aspiring to be homeowners who are falling through the cracks,” said Teresa Bryce Bazemore, President and CEO of the Bank of San Francisco. “Expanding the pool of creditworthy applicants through the use of more inclusive and innovative predictive models, such as VantageScore 4.0, effectively helps us deliver the American Dream of homeownership to more applicants and further narrow the racial wealth gap. Over the last few years, we have dedicated significant resources and commitment to investing in expanding Black homeownership and we are excited to be the first mover among our peers and bring the program to life.”

In October 2022, the Federal Housing Finance Agency announced its approval of VantageScore 4.0 for Fannie Mae and Freddie Mac, enabling widespread industry adoption of the new credit scoring method and opening the door to millions more qualified applicants by incorporating rental payments and other data points into scoring algorithms not included in traditional scoring models, all without lowering credit risk standards.

Notably, FHLBank San Francisco is the first in the Federal Home Loan Bank System to accept collateral that uses VantageScore’s predictive and inclusive credit scoring model. This decision is the latest step that FHLBank San Francisco has taken over the last four years to advance racial equity in homeownership and wealth building:

  • In June 2020, FHLBank San Francisco announced it would redouble its commitment to making homeownership possible for more Black households. 
  • In October 2021, FHLBank San Francisco launched the Racial Equity Accelerator, a two-year research and product advancement initiative with the Urban Institute to identify ways to close the racial homeownership gap. 
  • As part of that initiative, in October 2022, the Urban Institute issued an analysis, “Reducing the Black-White Homeownership Gap through Underwriting Innovations,” that detailed ways to use alternative data to expand the pool of eligible homebuyers and recognized the impact of VantageScore 4.0. 
  • In October 2023, FHLBank San Francisco published  “Closing The Racial Equity Gap: A Call To Action,” which includes a package of recommendations for updating the housing ecosystem to close the racial homeownership and wealth gaps. In that report, FHLBank San Francisco highlighted the VantageScore 4.0 model as being more inclusive and particularly effective in communities currently excluded from the mortgage marketplace. 
  • Following the report, FHLBank San Francisco began a validation process that was completed at the end of 2023, validating the VantageScore 4.0 model as acceptable for residential mortgage loans pledged to secure credit from FHLBank San Francisco. 

“The decision by the Federal Home Loan Bank of San Francisco to accept mortgage collateral backed by VantageScore will have a significant impact on boosting homeownership rates among creditworthy but traditionally underserved communities, while increasing safety and soundness,” said Anthony Hutchinson, SVP of Government and Industry Relations, VantageScore. “Addressing the persistent disparities that exist in mortgage lending is an important precursor to reducing the homeownership gap in communities of color, which is a priority that both VantageScore and Federal Home Loan Bank of San Francisco share.”

“We believe in driving financial inclusion and creating more equitable access to credit in the communities we serve,” said Richard Wada, Chief Lending Officer at Patelco Credit Union, headquartered in Dublin, California. “We've been using VantageScore 4.0 for our auto loans and credit cards and that's provided us with a new pathway to provide fair and accurate credit scores to a broader population, creating opportunities for us to lend credit safely and soundly to consumers historically left behind. We look forward to leveraging VantageScore 4.0 for mortgage lending in the future.” 

About the Federal Home Loan Bank of San Francisco

The Federal Home Loan Bank of San Francisco is a member-driven cooperative helping local lenders in Arizona, California, and Nevada build strong communities, create opportunity, and change lives for the better. The tools and resources we provide to our member financial institutions — commercial banks, credit unions, industrial loan companies, savings institutions, insurance companies, and community development financial institutions — propel homeownership, finance quality affordable housing, boost economic vitality, and revitalize whole neighborhoods. Together with our members and other partners, we are making the communities we serve more vibrant, equitable, and resilient and changing lives for the better.

About VantageScore®

Over 3,000 banks, fintechs, and other companies use VantageScore credit scores every day to assess consumer creditworthiness. Last year, over 19 billion VantageScore credit scores were used, representing a 30% yearly increase. Most top 10 US banks, large credit unions, and leading fintechs use VantageScore credit scores in one or more lines of business, including credit cards, auto loans, personal loans, and more. VantageScore is an independently managed joint venture company of the three Nationwide Credit Reporting Agencies (NCRAs) - Equifax, Experian, and TransUnion.

About Patelco Credit Union

Dublin, Calif.-based Patelco Credit Union is a not-for-profit credit union committed to serving the financial health and well-being of its membership. With more than 475,000 members, primarily in and around northern California, Patelco is committed to improving its members’ financial well-being and fueling hope and opportunity by offering personalized solutions, advice, and expertise that empower them to achieve personal financial freedom. Founded in 1936 with $500 in assets by employees of the Pacific Telephone and Telegraph Company, Patelco is in the top one percent of U.S. credit unions with more than $9 billion in assets.

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