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GSE Adoption

Alongside a broad coalition of industry participants, Members of Congress, civil rights groups housing advocates and many others, VantageScore has campaigned for years in the mortgage market so that the industry is afforded the same opportunity as all other lending industries: the benefits of competition. Competition has improved the predictiveness and inclusivity of credit scoring models, and that trend must continue in order for the mortgage industry to keep pace with shifting demographics and technological improvements.

Currently, policies overseen by the federal government creates a monopoly for FICO; denying lenders a choice in what scoring models they want to use in their businesses.

Credit score competition in other loan categories such as credit card and auto loans has enabled more predictive models that expand the scoreable population. In fact, this competitive, innovative environment has facilitated the development of VantageScore 4.0, a model that allows lenders to accurately assess approximately 40 million more consumers than conventional credit scoring models in a safe and sound manner. As a result, lenders can grow their businesses in a compliance-driven environment and more consumers can gain access to mainstream credit grantors without sacrificing their credit or pricing standards to reach a larger pool of prospective customers.

Who uses VantageScore? Click here to see how more than 2,200 lenders use VantageScore credit scores in their businesses.

Congress Takes Action

On May 24, 2018, S. 2155, “The Economic Growth, Regulatory Relief, And Consumer Protection Act” included Section 310, which amends the Federal National Mortgage Association Charter Act and the Federal Home Loan Mortgage Corporation Act by ordering the Federal Housing Finance Agency (FHFA) to establish standards and criteria for processes used by Fannie Mae and Freddie Mac to validate and approve credit-scoring models in accordance with the bill. In other words, establishing competition in the mortgage marketplace for credit score model developers, for the benefit of consumers and lenders.

What’s wrong with FHFA’s proposed rule on credit scores? Read why here.

Regretfully, in December 2018, FHFA proposed a rule that would, in fact, perpetuate and strengthen the FICO monopoly by essentially ruling all of FICO’s current competitors, including VantageScore, “ineligible.”

The aim of the legislation is to create a level playing field to enable a marketplace that evolves with the industry. It is critical that model developers beyond FICO and VantageScore be incentivized to innovate and participate.

Simply put, the language is not reflective of the intention and desire that Congress had when it passed the S. 2155.

The good news is that the proposed language is not final and is subject to industry input. Industry participants are encouraged to provide feedback to FHFA on the proposed rule until March 23, 2019.

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