federal housing finance agency (FHFA) announced late last year that it is replacing the classic FICO credit model. fannie mae And Freddie Mac Outlined timeline for further implementation with the FICO 10T and VantageScore 4.0 credit score models. but led a coalition of 17 unions Housing Policy Council (HPC), is now seeking more time with the transition and highlighting the challenges associated with it.
Sandra Thompson, director of the FHFA, in a letter to the HPC and other organizations – including mortgage bankers associationThe National Association of RealtorsThe American Bankers Association and represent other lenders, servicers, consumer advocates and mortgage insurers – highlighting issues related to the transition.
,[T]That transition, as outlined, will occur in a multi-stage process that does not adequately address the far-reaching impacts, significant costs, and immense operational complexity of policy changes,” the letter states. write to urge the FHFA to reformulate the proposed timeline to provide time and an adaptable structure that will allow stakeholder feedback to be considered and incorporated.”
Earlier this month, the HPC also submitted a separate paper highlighting the potential issues. Both letters state that such a transformation is “one of the most ambitious projects ever undertaken within the housing finance system.”
The HPC said of the letters, “Fundamentally, our organization is extremely concerned that the three-and-a-half year timeline and process by recognizing this reality puts the stability of the housing finance system at risk.” “Our letter asks the FHFA to rewrite the proposed plan with a more flexible timeline and an adaptable structure that will allow regulators to truly listen and engage industry and advocate for feedback.”
At a recent congressional hearing, Thompson fielded questions from members of Congress about the proposed change, with both Republican and Democratic politicians expressing concern about what it would mean for those trying to access mortgage loans. It is possible
“We support the position expressed in your recent testimony before the House Financial Services Committee that the credit score model should be flexible enough to incorporate ‘transition timeline tests’ and unforeseen events, but consumers, enterprises and others Must be efficient enough to ensure profit. …’ [from the updated credit score models],” the letter said.
The organizations noted that their reviews of the proposed timeline raised concerns that “the plan does not include enough time, flexibility or detail to effectively execute this extraordinary effort,” the letter states. “Further, the plan does not reflect an agile and iterative process to incorporate stakeholder feedback.”
The organizations make several requests of the FHFA in the letter, including that the agency provide a “comprehensive, transparent and iterative stakeholder engagement process”; that the FHFA provides “robust” data transparency, including long-term historical datasets relating to the current tri-merger system; and that the implementation timeline be “re-calibrated” to accommodate data analysis, modeling and a stakeholder engagement process to measure cost, complexity and consumer impacts from this transition.
“Without this type of coordination and concurrent adoption, there could be significant consumer confusion and operational backlogs should a potential borrower change loan programs,” the letter notes.
