The Federal Housing Finance Agency (FHFA) has proposed a rule on the process for validation and approval of credit score models by Fannie Mae and Freddie Mac.
Instead of facilitating competition, the proposed rule would perpetuate and strengthen a monopoly by ruling all of FICO’s current competitors “ineligible.” FHFA’s proposed language is not reflective of the intention and desire that Congress had when it passed the credit score competition provisions of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018.
Should the proposed rule stand, the federal government would be picking winners and losers to the detriment of millions of consumers. The current models that exclude millions of credit worthy consumers would continue to be used for the next four more years and possibly beyond.
Industry participants are encouraged to provide their feedback through a comment period that will end on March 21, 2019. These comments will shape how the rule is implemented.
We strongly encourage market participants to submit their feedback to this proposed rule. The future of mortgage credit scoring and basic American values of fairness and competition are at stake in this moment.
Further information and the portal for comment solicitations is on FHFA’s website here.