Mon, Aug 7, 2017
A bill that would allow Fannie Mae and Freddie Mac to consider alternative credit-scoring models beyond the FICO credit scoring models, has been introduced in the Senate. Earlier this year the House introduced a similar bill.
The Senate version of the “Credit Score Competition Act,” is sponsored by Sens. Tim Scott, R-South Carolina, and Mark Warner, D-Virginia and directs the Federal Housing Finance Agency to create a process that would allow alternative credit scoring models to be validated and approved by Fannie Mae and Freddie Mac when they purchase mortgages.
Fannie Mae and Freddie Mac require the use of specific scoring models developed using data from 1995 to 2000. The sponsors of the Senate bill say the decades-old credit scoring model excludes people because it does not take into account consumer data on rent, utility and cell phone bill payment, and disproportionately hurts African-Americans, Latinos, and young people who are otherwise creditworthy.