FHFA Considers Alternative Credit as FICO Scores Tumble

Dec 21, 2017

FICO scores were in the spotlight with a regulatory agency considering credit scoring alternatives and new data highlighting a decline in FICO scores in all loan categories.

On the regulatory front, the Federal Housing Finance Agency (FHFA) issued a Request for Input (RFI) on whether to expand Fannie Mae and Freddie Mac’s credit score requirements from the current evaluation vehicles of Classic FICO, FICO 9 and VantageScore 3.0. Input to the RFI is being accepted through Feb. 20.

“In issuing this RFI, FHFA hopes to obtain honest and reliable information and stakeholder feedback on the operational and competition aspects of changing Fannie Mae and Freddie Mac’s credit score requirements,” said FHFA Director Mel Watt. “Responses to the RFI will provide important details on the complexities of this decision, which is why I encourage stakeholders to respond in the most meaningful way possible.”

Separately, new data from Ellie Mae found that average FICO scores on all loans dropped to 722 in November from 724 in October. the month prior. Refinances saw FICO scores down across loan categories, with FHA refinance FICO scores dropping from 650 in October to 645 in November, conventional refinance FICO scores dipping to 730 from 732 the month prior and VA refinance FICO scores slipping to 700 from 702 in October.

“Interest rates rose slightly in November while we saw the refinance share hold at 39 percent of all closed loans,” said Jonathan Corr, President and CEO of Ellie Mae. “Additionally, we saw FICO scores drop modestly, especially across refinances, indicating that lenders may be loosening credit standards to attract the dwindling refinance market. This is certainly a trend we will continue to watch into the winter months.”

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Phil Hall

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Dec 21, 2017

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