Freddie Mac's capital-markets head picks up the chief risk officer job for no extra pay

Glessner holds the chief risk officer title jointly with his existing job, for no additional compensation, according to the securities filing ^[2]. On those terms Freddie covers the role without adding an executive or a salary. The person who now heads risk also runs the investments and capital markets division ^[2]. The change follows an earlier wave of departures at Fannie Mae ^[3]. The timing matters because the chief risk officer's oversight extends to the modernization of loan pricing and scoring, according to American Banker, and the GSEs' oversight agency has been speeding that work up ^[4]. The live item is the unified pricing grid ^[5]. About 5% of new GSE loans now arrive with VantageScore 4.0 ^[6], so roughly 95% still come without it ^[16]. The GSEs price on external scores and underwrite on internal models ^[7]. A mis-set grid therefore changes the fees collected on loans the GSEs would have bought anyway ^[18]. Outside concern has centered on the risk of one scale for both scores ^[19]. Clifford Rossi ran risk at Citi, Washington Mutual and Countrywide during the financial crisis and, before that, single-family risk management at Freddie ^[21]. "It virtually guarantees the GSEs will not only be exposed to higher credit risk but will also not be collecting sufficient fees to compensate," he wrote in a LinkedIn post ^[20]. S&P Global Ratings has done the mapping. Its analysts said translating VantageScore 4.0 and 10T, another score the GSEs plan to add ^[15], into classic FICO terms is doable. It needs adjustments at most points on the scale except around 640 ^[10]. Below that level the newer scores generally align with higher FICOs, and above 647 S&P makes deductions ^[10]. The old 20-point gap was a single flat correction; the unified grid set it to zero ^[5]. By S&P's mapping, zero is too harsh below 640 and too generous above 647 ^[17]. The analysts also said lender choice between scores could inflate values ^[12]. "The impact on RMBS credit is manageable, but it's manageable when thoughtful mapping is applied," said Vanessa Purwin, co-head of U.S. residential mortgage-backed securities ratings at S&P ^[11]. Glessner could leave the single scale alone, or restore a differential, perhaps a sliding one like S&P's. Or the pace could be set outside Freddie by the oversight agency, whose chief, Bill Pulte, reportedly plans to move soon on a tri-merge alternative ^[22]. American Banker sees room for either a faster or a slower approach ^[22]. I think the third path is the likeliest, because the agency has been the one accelerating this work ^[4]. I would not expect lenders using VantageScore to face a delay because of this filing. The counter-case is that a risk chief who also runs a business division is where next steps, such as adding 10T, wait for sign-off ^[2][15]. I would be wrong if Freddie restores any score gap or the 10T addition slips. The tri-merge plan cuts against the same companies. The three bureaus behind VantageScore also control the tri-merge, and the Consumer Data Industry Association, a trade group that represents them, has argued that cutting the number of reports could be risky given differences in their data ^[8]. S&P's analysts consider those differences relatively minor ^[9]. The agency is helping the bureaus' score gain share while it reportedly prepares an alternative to the three-report bundle they control ^[5][22][8]. S&P is watching because the GSEs often set trends that private RMBS follows ^[9]. In private deals classic FICO has generally been submitted alongside the new scores ^[13]. Purwin, giving her personal view and not necessarily S&P's, expects that to change ^[23]. "I think that we'll see in the not too distant future a transaction with loans scored 100% by one of these alternative scoring models," she said ^[23].