FHFA Publishes Final Rule on Credit Score Models
The credit-score change, which becomes effective in Oct., will make it easier for some families without traditional credit histories to be approved for a mortgage.
This final rule establishes standards and criteria and outlines a four-phase process by which the Enterprises will validate and approve third-party credit score models.
Credit score models will be evaluated for factors such as accuracy, reliability, and integrity, as well as impacts on fair lending and the mortgage industry.
The final rule establishes aggressive but reasonable deadlines for the Enterprises to solicit and assess complete applications received.
Once a credit score model(s) has been evaluated following the process in the rule and approved for implementation, the industry will be given time to implement the new credit score model.
The final rule does not address the timeframe for industry adoption and implementation of a new credit score model(s). These timeframes will be in addition to the timeframe for the entire validation and approval process. FHFA and the Enterprises will work with the industry on implementation once the Enterprises have a new validated and approved credit score model(s). FHFA believes, based on years of related credit score work, that it will take the industry approximately 18-24 months to adopt a new credit score model after a model has been approved by an Enterprise.
“A borrower’s credit score unlocks mortgage financing through the GSEs, a critical gateway for millions of homebuyers,” says National Association of Realtors® President John Smaby. “However, the credit score currently used by Fannie Mae and Freddie Mac is nearly two decades old, ignoring innovations in modeling and overlooking a wealth of non-traditional information about potential homebuyers."
Some of this information above is Reprinted with permission of Florida Realtors. All rights reserved.