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FHFA looks to update credit scoring, mortgage financing in 2018

by Rincey Abraham

The Federal Housing Finance Agency will be making changes as outlined in its 2018 Scorecard, which was released late last month. The scorecard highlights specific conservatorship priorities for Fannie Mae, Freddie Mac and Common Securitization Solutions (CSS).

The three main goals highlighted in the scorecard were:

  • Maintaining credit availability and foreclosure prevention activities for new and refinanced mortgages to foster liquid, efficient, competitive and resilient national housing finance markets;
  • Reducing taxpayer risk through increasing the role of private capital in the mortgage market; and
  • Building a new single-family infrastructure for use by the enterprises and adaptable for use by other participants in the secondary market in the future.

“The enterprises performed well throughout 2017.  The 2018 Scorecard continues to set a high standard for them to meet as they work to support housing finance and access to credit for homeowners and renters in a safe and sound manner,” said FHFA Director Melvin L. Watt.

One area of focus for the agencies will be finding opportunities to improve access to credit in a safe way. To do so, the FHFA is assessing its credit scoring model and looking for input on changes it can make.

In the 2015 and 2016 scorecards, each agency looked at the impact of updating credit score requirements from Classic FICO to another model. Barrett Burns, VantageScore Solutions president and CEO, believes that requesting input on future changes will help reduce the monopoly of FICO.

“FHFA’s request for input is a step forward towards creating a marketplace where credit scoring models can be judged on their predictiveness, innovation and inclusivity instead of the status quo where the government has created a de-facto monopoly for FICO,” Burns said to HousingWire. “Monopolies never benefit markets or consumers and they create the opportunity for pricing power unchecked by competition.”

Those at FICO also are supportive of potential changes, telling HousingWire that over the years, it has proven itself to be independent, predictive and reliable.

“This request for information is an important opportunity to ensure that credit underwriting requirements are in the best interests of taxpayers and homebuyers,” FICO continued. “They deserve a credit scoring model that responsibly provides access to homeownership while maintaining independence and strong standards to ensure the continued stability of the U.S. housing market.”

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