Lender and GSE responses to the “lender choice” credit score selection policy announced last year are likely to have significant impacts on the allocation of mortgage credit among credit investors.  As analyzed in several studies, including my own, absent a response by the GSEs, there is the potential for adverse selection to raise credit risk for the two housing agencies as lenders rationally select the highest credit score (either FICO® or VantageScore® 4.0) to send to Fannie Mae or Freddie Mac. 

The GSEs’ likely response would be to raise loan-level price adjustments (LLPAs) in an effort to mitigate details ⇒

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