FHFA Abandons Plans To Create Alternative Credit Score For GSEs. Agency Decides To Right New Credit Score Rules
The Federal Housing Finance Agency is abandoning plans of creating a new credit score for homeowners. Instead, the agency will instead begin creating new regulations for lenders. As a result, they have requested providers of alternative credit scores to submit their proposals. FHFA wants to consider them for use by Fannie Mae and Freddie Mac.
The FHFA had begun evaluating credit score models last year. It also evaluated if the GSEs should be required to switch to the latest scoring model from Fair Isaac Corp.
Fair Isaac introduced their latest credit score model named FICO 9. FHFA is also considering the use of VantageScore’s latest model, 3.0.
The FHFA had given itself a deadline of the end of this year to decide on new scores.
Fannie Mae and Freddie Mac currently use the older FICO 5 model. VantageScore is a joint venture of the credit bureaus Equifax, Experian and TransUnion.
FHFA Director Mel Watt said in a press release:
We have determined that proceeding with efforts to reach a decision based on our Conservatorship Scorecard Initiative process and timetable would be duplicative of the work we are mandated to do under Section 310 of the Act.
These steps include developing a proposed rule. The FHFA rule is then presents it to the public for comment. The agency would then issue a final rule to govern the verification of credit score models.