HUD Secretary: FHA looking at alternative credit scoring models

by 02 Apr 2015
At a symposium earlier this week, housing industry stakeholders considered how alternative credit scoring models could benefit those who have limited credit records or debt such as medical charges. The purpose is to give access to mortgages for those who are otherwise responsible borrowers.

Newer credit scoring methods do not penalize those who may have been late with occasional payments or have unsettled medical debt and the symposium discussed how tight credit standards and outdated credit scoring is particularly unfair on minorities and others with unique financial circumstances.

At the NAR-hosted event, Secretary of Housing and Urban Development (HUD) Julian Castro underscored the agency's commitment to widening the circle of opportunity for responsible families by making homeownership more affordable and accessible.

"FHA's work alone will not solve all the industry's challenges, which is why I appreciate this focus today on out-of-the-box thinking," he said. "I know that new credit scoring models are being developed so that non-traditional factors can be considered when determining creditworthiness."
Castro said FHA is exploring the use of new credit scoring models. "We'll look at every option that brings housing opportunities within reach of more Americans," he said.

NAR said it first called on federal regulators and the credit and lending communities in 2011 to reassess the entire credit structure and look for ways to increase the availability of credit to qualified borrowers who are good credit risks.

 Jim Park, past chair for the Asian Real Estate Association of America, noted that there was a clear consensus from all of the symposium’s participants that the government-sponsored enterprises should update their scoring models and also create added market competition in the credit evaluation system.

“These critical efforts will expand credit to more minority and immigrant consumers and reverse the unfortunate trend of homeownership decline in America,” he said.

"If lenders and the government-sponsored enterprises were to adopt alternative credit scoring methods, such as FICO 9 and VantageScore 3.0, they could expand access to mortgage credit without dramatically increasing risk in the housing market," NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Arkansas, added.


  • by Jburns | 4/2/2015 10:36:42 AM

    Any person today, and for the last 40 plus years in mortgage lending, who are "qualified borrowers who are good credit risks" have been able to get a mortgage mortgage. It does not have today and it has never had, anything to do with minorities or immigrants. It has to do with reponsibility and work ethic. Not everyone should own a home, nor is it everyone's dream to own a home. That was the same mind set of the Clinton administration in the mid 1990's that began the ruination of Fannie Mae and Freddie Mac, that eventually caused the housing crises of 2007. The do gooders that continue to force people into mortgage mortgages and home ownership because they feel sorry for them, are not doing anyone any favors. The credit score system is not flawed, it is the people in power who assume everyone should own a home and can handle that financial responsibility.

  • by Jacob | 4/2/2015 11:39:58 AM

    The credit score system is flawed, one example is the way collection accounts are reported. An old collection account can be re-reported or sold to another collection company and this drops the score although it is not indicative of borrower's current ability to pay credit. In many cases borrower's had no knowledge of collection account. Or if borrower is able to pay collection, this causes a re-report of account activity which also drops credit score in the short term. It does not make sense for a borrower to pay off collection and have they score drop instead of stay the same or increase.

  • by Pat | 4/2/2015 2:40:22 PM

    This is great news! Now responsible people no longer have to pay medical bills either.


Should CFPB have more supervision over credit agencies?