FHFA invites interested parties to submit comments on the proposed rule
The Federal Housing Finance Agency has proposed a rule that would establish standards and criteria for the validation and approval of third-party credit score models used by Fannie Mae and Freddie Mac.
FHFA is inviting interested parties to submit comments on the proposed rule. The proposal is required by the Economic Growth, Regulatory Relief, and Consumer Protection Act enacted in May.
Under the proposal, a four-phase process for a GSE to validate and approve credit score models would be established. These phases are solicitation of applications from credit score model developers, review of submitted applications, credit score assessment, and enterprise business assessment.
GSEs are not required by the law to use a third-party credit score model. However, if a GSE conditions the purchase of a mortgage loan on a borrower's credit score, that credit score must be produced by a model that has been validated and approved based on the standards and criteria in the law and FHFA regulations.
Prior to the law’s enactment, FHFA had been evaluating the potential impact of a new credit score model. FHFA announced in July that it would not make a decision on updating the credit score model used by the GSEs and instead would shift its focus to implementing the steps required under the law.