There is a rather unusual request up on the Federal Housing
Finance Agency’s (FHFA’s) website. Two FHFA
analysts, saying that the issue of updating the credit score requirements for
Fannie Mae and Freddie Mac (the GSEs) is among the most difficult they have faced,
are personalizing an earlier formal Request
for Input (RFI) published in the Federal Record.
Robert M. Dunsky, Principal
Financial Engineer, and Elizabeth R. Spring, Senior Policy Analyst, from the Offices
of Housing & Regulatory Policy and Policy Analysis & Research
respectively wrote the request. They
explain that the GSEs currently use the Classic FICO model, supplementing it
with their own automated underwriting systems (AUS) where no credit score is
available for a borrower. FHFA believes
an update to the GSE credit score requirement would be desirable, and is
FICO, FICO 9 and VantageScore 3.0. The
analysts are requesting interested parties to provide feedback on the following
- Option 1:
The GSEs would require delivery of a single score – either FICO 9 or
- Option 2: Two scores would be required, FICO 9 and VantageScore 3.0. This option would
require policy decisions regarding treatment of borrowers with one of the
scores but not both.
- Option 3: Lenders would be allowed to deliver loans with either
FICO 9 or VantageScore 3.0. They would have to choose one score or
the other for a defined period (e.g., no less than 12 months). This
option would require policy decisions on the length of that commitment and
on whether to allow mortgage aggregators and brokers to adopt a single
score approach or allow them to aggregate loans underwritten with FICO 9
or VantageScore 3.0 scores.
- Option 4: The GSEs would allow delivery of multiple
scores through a waterfall approach establishing a primary and a secondary
credit score. Where a borrower did not have a primary credit score,
a lender could choose to provide the secondary one. FHFA and the GSEs
would need to determine how a secondary credit score would interact with
each GSE’s AUS, including the ability to evaluate a loan application where
a borrower does not have a credit score and how to apply the policy for
manually underwritten loans.
Dunsky and Spring say the credit
score decision will impact the industry — including borrowers, lenders, servicers,
mortgage insurers, and investors — for years to come. They encourage all interested parties to
respond in as much detail as possible to the specific questions in the RFI and
promise to review them all. The comment
period is open until February 20, and there are further details on the options
and the larger context to be considered in the formal document.
Your input, they say, will help
inform FHFA’s analysis on this important decision.