FHLBank of New York expands credit access for underserved borrowers

In a significant move designed to expand homeownership access, the Federal Home Loan Bank of New York (FHLBNY) announced the adoption of an alternative credit scoring model to boost mortgage credit availability.

The wholesale bank will now allow members to pledge mortgage collateral using the VantageScore 4.0 system. FHLBNY will partner with 330 lenders across New York, New Jersey, Puerto Rico and the U.S. Virgin Islands to reach 3.1 million prospective borrowers through innovative credit solutions.

Credit scores from VantageScore 4.0 give lenders alternative data points — including rental payment histories — to assess borrower worthiness. Traditional scoring models that primarily consider credit history, debt-to-income ratios and other factors can limit underserved homebuyers.

With the integration, FHLBNY joins its peers at the Federal Home Loan Bank of Chicago and the Federal Home Loan Bank of San Francisco in efforts to narrow the racial homeownership gap, which has increased in recent years, via more credit opportunities for underserved borrowers.

FHLBNY’s decision to add the VantageScore 4.0 follows a push from Democratic Reps. Ritchie Torres and Gregory Meeks, who in August formally urged FHLBNY to accept mortgage collateral and recognize more inclusive data. Torres describes FHLBNY’s initiative as the first layer of a critical foundation for wealth creation in the U.S.

“The decision by the Federal Home Loan Bank of New York to recognize Vantage Score 4.0 lays a critical foundation for broad base wealth creation in America,” Torres said in a statement. “I have constituents who have reliably paid their rent in full and on time for decades, and yet none of their rental history is taken into account by conventional credit scoring.”

Meeks echoed Torres’ statement, highlighting his personal background and the vital role homeownership played in his upbringing. 

“My family’s own experience is a personal attestation to the importance of home ownership. By allowing for the use of VantageScore 4.0 credit scores, the Federal Home Loan Bank of New York is broadening opportunities and ensuring that people who have been traditionally left out will have the ability to begin their homeownership journeys,” Meeks said.

The announcement comes as Democratic lawmakers champion affordable housing solutions. Torres recently introduced the Accelerated Production Housing Act (ASAP Housing Act) that aims to boost affordable housing supply. Meanwhile, Meeks introduced several bills — including the American Dream Down Payment Act — to aid first-time and underserved homebuyer groups.

FHLBNY’s affordable housing efforts may continue to grow next year, as the bank received more than $100 million in community funding for homeownership programs in 2024.