Letter to FHFA on Recommendations for FHFA's Credit Score Models and Reports Initiative

Dear Director Pulte,

On behalf of the American Bankers Association, Housing Policy Council, Independent Community Bankers of America, Mortgage Bankers Association, Structured Finance Association, and U.S. Mortgage Insurers, we are writing to provide recommendations on the Federal Housing Finance Agency's (FHFA) Credit Score Models and Reports Initiative. Our organizations represent a wide range of counterparties to Fannie Mae and Freddie Mac (the Enterprises), including lenders, servicers, investors, and mortgage insurers. As such, our organizations have a direct interest in the impact of the business decisions of the Enterprises, including the manner in which their credit score policies contribute to a competitive and sound housing finance system.

We appreciate FHFA's announcement on January 16 that the implementation date for this initiative would be extended from 4Q 2025 to a to-be-determined date. However, we continue to have serious concerns that the Credit Score Models and Reports Initiative, as currently defined, is overly complex, costly to consumers, and missing key requirements that are necessary for a successful transition.

In October 2022, FHFA announced the validation and approval of two new credit score models, FICO 10T and VantageScore 4.0, for use by the Enterprises. Simultaneously, the agency introduced a bi-merge option allowing lenders to use credit scores based on reports from two of the consumer credit reporting agencies in lieu of the traditional tri-merge.

The mortgage industry recognizes the intended benefits of more reliable models and supports this initiative. However, since its initiation, the project has generated significant uncertainty, complexity, and multitude of unanswered questions.

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