Decisions regarding the credit score model used by Fannie Mae and Freddie Mac have been delayed by the Federal Housing Finance Agency (FHFA) after it was announced that the agency will not be making any changes this year as previously announced.
Instead, the agency will focus on Section 310 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (Public Law 115-174), which was enacted in May, according to the FHFA’s statement. This act will require the FHFA to utilize rule making in order to “define the standards and criteria the enterprises will use to validate credit score models.”
“After careful evaluation, we have determined that proceeding with efforts to reach a decision based on our Conservatorship Scorecard Initiative process and timetable would be duplicative of, and in some respects inconsistent with, the work we are mandated to do under Section 310 of the Act,” said FHFA Director Melvin L. Watt. “In light of that, we are communicating to Congress that we are transferring our full efforts to working with the enterprises to implement the steps required under Section 310. These steps include developing a proposed rule, receiving and evaluating public comment on the proposed rule and issuing a Final Rule to govern the verification of credit score models. Thereafter, we will follow through on the steps required to implement the new Rule."
According to the statement released by the FHFA, the agency has been working with the enterprises in order to best evaluate the possible impact of a revamped credit score model “on access to credit, safety and soundness, operations in the mortgage finance industry, and competition in the credit score market for some time as part of an ongoing Conservatorship Scorecard Initiative.”
As prompted by the Initiative, the FHFA had done a measure of outreach to industry stakeholders, including lenders, mortgage insurers, and investors, as well as consumer advocates. To date, more than 100 stakeholders had responded to a Request for Input issued as part of the “Scorecard Initiative.”
Read more about the recent conversations surrounding this bill and the FHFA here: