HousingWire

Credit Scores, Non-Agency Loans, and Risk Management: Jennifer McGuinness Breaks Down What Lenders A

The conversation between Allison Leforja and Pivot Financial CEO Jennifer McGuinness centers on the evolving landscape of non‑agency mortgage products and the contentious shift in credit‑scoring models. McGuinness emphasizes that non‑agency loans, including DSCR, bridge, and fix‑and‑flip structures, are not inherently riskier when originated with disciplined underwriting, and she highlights a notable surge in jumbo and non‑QM volumes, now comprising roughly 13‑16% of the market. Key insights include the need for diversification beyond agency‑only pipelines, the re‑emergence of creative loan structures such as interest‑only and pay‑option ARM products, and the recognition that borrowers with mixed‑income streams can be less risky than traditional “vanilla” profiles. The panel discussion underscored that non‑agency does not equal non‑QM, and that proper product‑to‑borrower matching can improve outcomes without inflating risk. McGuinness also critiques the stalled competition between FICO and Vantage scoring models, noting that the FHFA’s lender‑choice rule forces lenders to pick one model rather than use the higher score, contrary to market chatter. She points out a 1,400% pricing increase by FICO and similar hikes by the bureaus, driven by decades‑long flat‑fee agreements, which strain lender economics. The implications are clear: lenders must broaden their product suites, stay vigilant about scoring model shifts, and anticipate cost pressures from credit‑bureau pricing. Misreading non‑agency risk or relying on outdated scoring assumptions could erode profitability, while strategic diversification and informed credit‑score selection can sustain growth in a fragmented market.