Groups Express Support For Bill That Creates Mechanism To Review Scoring Models

WASHINGTON—NAFCU and other groups have jointly written in support of legislation coming soon from Senate Banking Committee members Tim Scott (R-SC) and Mark Warner (D-VA) to create a mechanism for consideration and review of scoring models for use by lenders selling their loans on the secondary market.
Fannie Mae and Freddie Mac require the use of specific scoring models developed using data from 1995 to 2000. "This serves to disqualify, or 'price out' many would-be borrowers whose credit reports cannot generate a credit score or who end up paying significant penalties based on their credit scores," the groups wrote.
The Credit Score Competition Act, set to be introduced this week, would authorize the Federal Housing Finance Agency to set standards and criteria for any process used by either enterprise to validate and approve credit scoring models. It would not mandate that Fannie and Freddie adopt other scoring models but allow for consideration of different ones, NAFCU explained.
In Tuesday's letter, the financial industry groups said the bill "will help consumers by increasing competition among credit score providers in the mortgage market. This legislation will especially help unbanked or under-banked consumers."
The letter was signed by NAFCU, the Center for Financial Services Innovation, Consumer Data Industry Association, Consumer Mortgage Coalition and the Housing Policy Council of the Financial Services Roundtable.
Earlier this year, Rep. Ed Royce (R-CA) introduced a bill (HR 898) that would require Fannie Mae and Freddie Mac to consider alternative credit scores.