The Federal Housing Finance Agency is giving the mortgage industry more time to provide input on whether Fannie Mae and Freddie Mac should begin using alternative credit scoring models beyond the traditional FICO score.
Back in December, the FHFA began requesting input on the possibility of switching to FICO 9, VantageScore 3.0, or some combination thereof.
Originally, the deadline for industry participants to provide feedback on the credit score issue was Feb. 20, 2018.
The FHFA announced Friday that it is extending the deadline to March 30, 2018.
“FHFA is seeking input on all aspects of a potential change from the current Classic FICO requirement, including feedback on the operational and competition considerations of continuing to use a single credit score model or allowing the use of more than one credit score model,” the FHFA said in its announcement.
In its request for input, the FHFA laid out several different scenarios for how Fannie and Freddie could use credit scoring models in the future, including:
Option 1 – Single Score: The Enterprises would require delivery of a single score –either FICO 9 or VantageScore 3.0 – if available on every loan.
Option 2 – Require Both: The Enterprises would require delivery of both scores, FICO 9 and VantageScore 3.0, if available, on every loan. This option would require policy decisions about how to treat borrowers with a credit score from one provider but not the other.
Option 3 – Lender Choice on which Score to Deliver, with Constraints: The Enterprises would allow lenders to deliver loans with either FICO 9 or VantageScore 3.0, when available. Lenders would have to choose one score or the other for a defined period of time (e.g., no less than 12 months). This option would require policy decisions on the length of time a lender or correspondent would need to commit to a certain credit score. Additionally, policy decisions would need to be made on whether to require mortgage aggregators and brokers to adopt a single score approach or whether to allow them to aggregate loans underwritten with FICO 9 or VantageScore 3.0 scores.
Option 4 – Waterfall: The Enterprises would allow delivery of multiple score(s) through a waterfall approach that would establish a primary credit score and secondary credit score. Where a borrower did not have a credit score under the primary credit score, a lender would have the option to provide the secondary credit score. FHFA and the Enterprises would need to determine how a secondary credit score option would interact with each Enterprises’ automated underwriting systems’ ability to evaluate a loan application where the borrower(s) do not have a credit score and how to apply the policy for manually underwritten loans.
