In response to the upcoming release of credit score data by the Federal Housing Finance Agency as part of the new credit score models to be used by Fannie Mae and Freddie Mac, the American Bankers Association and four associations sent a joint letter today requesting additional data elements for the industry to begin the necessary analysis to transition to the new credit score models that banks and other mortgage industry players need for their analytics.
FHFA last year announced it would replace the FICO credit score model used by Fannie and Freddie with the FICO 10T and the VantageScore 4.0 credit score models. The associations expressed concern that VantageScore’s data would be too limited, as it would include information stretching back until only 2013. The use of models calibrated to only the post-financial crisis period would not likely meet prudential regulatory standards or internal requirements for model validation with which they must comply, they said. “Our members continue to believe that it is imperative to have credit reporting data ‘through the cycle’ back to 2003 given the sensitivity of mortgage default and prepayment to origination credit scores.”
The associations listed several elements and clarifications that should be included in the upcoming VantageScore data release for the third quarter of the year. They include the unrestricted use of data contained in the mortgage-backed security, credit risk transfer and historical performance disclosures; sufficient data to evaluate the effects of new representative score calculation; and sufficient detail to evaluate the accuracy and fair-lending analysis of bi-merge combinations. “[W]e also recommend the delay of any scheduled data release until these recommendations can be accommodated,” they said.
