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FHFA Invites Public Engagement On Modernized Credit Score Transition

Christine Stuart
Sep 11, 2023
Sandra Thompson

Stakeholder forums and listening sessions planned to ensure seamless rollout; extended timeline for bi-merge credit report requirement in play.

The Federal Housing Finance Agency (FHFA) is seeking public engagement to assist in transitioning to modernized credit score models and credit report prerequisites for loans secured by Fannie Mae and Freddie Mac. This engagement will encompass stakeholder forums and listening sessions to pinpoint issues, prospects, and hurdles tied to the rollout of the new criteria. It also seeks insights into possible refinements to the proposed adoption timeline.

Sandra L. Thompson, FHFA director, said, “This engagement process signifies our proactive approach in involving public input in the successful adoption of the new credit score guidelines at the Enterprises. It's crucial we gather insights from market players and stakeholders affected to guarantee a seamless transition that averts unnecessary complications and costs,” she said.

A year prior, in October 2022, FHFA greenlighted the use of both FICO 10T and VantageScore 4.0 credit score models by the two government enterprises (GSEs) after a review of potential modifications to their credit score prerequisites necessitated by laws and regulations. Both models passed the GSE's evaluations, surpassing the reliability, precision, and integrity benchmarks. Once the implementation process is finalized, all single-family loans acquired by the enterprises will mandate scores from both these models when feasible.

Additionally, in the same month, FHFA declared that the GSEs would be shifting from a tri-merge to a bi-merge requirement. This transition means that credit reports from just two out of the three national consumer reporting agencies will be deemed mandatory, as opposed to the previous requirement of all three. This change, as per FHFA, should fuel competition in the market without compromising the risk management quality. The bi-merge requirement's deployment is anticipated to extend beyond the original proposed date of the first quarter of 2024.

“FHFA’s reformulated implementation plan is an acknowledgment of the significant operational complexities and the magnitude of this effort on the housing finance system, consumers, and investors of mortgage assets. MBA has advocated for a longer implementation timeline, and we appreciate FHFA taking our recommendations to heart," Mortgage Banker Association President Bob Broeksmit said. 

“We continue to support FHFA’s efforts to ensure better competition in the credit scoring space and will work with them to ensure unintended consequences are mitigated and that costs, complexity, consumer impact, and policy implications are taken into consideration.”

Stakeholders wishing to be part of this transformative process can forward their details to [email protected]. The FHFA plans to roll out additional details to participants soon, with preliminary sessions expected in the following weeks. Responses by Sept. 25, 2023, are encouraged for those interested in attending the initial forums.

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