The American Bankers Association and more than 15 trade groups have provided feedback to the Federal Housing Finance Agency on plans to update the credit score process. Under the proposal announced in March, Fannie Mae and Freddie Mac would replace the current FICO credit score model with the FICO 10T and the VantageScore 4.0 credit score models, and transition from requiring three credit reports to two for single-family loans.
While supporting FHFA’s goals to recalibrate credit scoring, industry groups raised concerns about timing and stakeholder feedback. FHFA “does not adequately address the far-reaching impacts, significant costs and immense operational complexity of the policy changes,” the groups wrote in a comment letter released today. They recommend “sufficient time and an adaptable structure” to consider and incorporate stakeholder feedback, adding that a “disciplined and orderly transition will minimize risk to the stability of the housing finance system.”
The groups also called for an industry feedback process that includes “robust data transparency,” specifically including the release of long-term historical datasets for Classic FICO, FICO 10T and VantageScore 4.0, allowing for analysis of the changes and the design of new models that considers the “costs, complexity, consumer impact and policy implications of the transition.”
“We expect that one external complication that could affect the timeline is government agency adoption of the new scoring models,” the groups wrote. “We anticipate that the enterprises may need to advise the government lending programs, to assist with simultaneous policy updates to maintain existing underwriting pathways between programs. Without this type of coordination and concurrent adoption, there could be significant consumer confusion and operational backlog, should a prospective borrower change loan programs.”
