Huge housing trade groups push FHFA for FICO alternatives
A coalition of the housing industry’s largest trade groups want Fannie Mae and Freddie Mac to look beyond FICO and begin using alternative credit scoring models.
In a letter sent last week to Federal Housing Finance Agency Director Mel Watt, the Mortgage Bankers Association, National Association of Realtors, the National Association of Home Builders, and other groups express their disappointment in Watt, who recently threw cold water on the idea that Fannie and Freddie would begin using alternative credit scoring models at any point in the next two years.
In a speech earlier this month, Watt said that making any changes to the government-sponsored enterprises’ credit scoring models before 2019 would be a “serious mistake.”
One of the reasons cited by Watt is the implementation of the single security, a projected billion-dollar joint initiative from Fannie and Freddie to develop a single mortgage-backed security that will be issued by the GSEs.
Earlier this year, the FHFA announced that it was delaying the implementation of the single security until 2019. In his speech, Watt noted the delay a reason for pushing back any consideration of using any credit scoring model beyond the FICO score the GSEs currently use.
“First, based on the overwhelming feedback we have received from the industry, it is clear that it would be a serious mistake to change credit scoring models before mid-2019 when the Common Securitization Platform is fully operational and the Enterprises implement the Single Security,” Watt said earlier this month. “For this reason, any credit score model change would not go into effect before 2019 even if I announced a decision today.”
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