House bill urges GSEs to accept new credit scores.
On Dec. 10, a bipartisan-supported bill was introduced in the House called the Credit Score Competition Act of 2015 (H.R. 4211) to enable government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac to consider using other credit-scoring models than the traditional FICO[R] scores they currently use.
The legislation was introduced by Rep. Ed. Royce (R-California) and Rep. Terri Sewell (D-Alabama), and is designed to encourage the use of newer scoring models that take into account factors such as timely rental payments by loan applicants. Both of the bill's authors are on the House Financial Services Committee and are urging swift action by their colleagues to move the legislation.
Rep. Royce said in a press release, "The GSEs' use of a single credit score is an unfair practice that stifles competition and innovation in credit scoring. Breaking up the credit-score monopoly at Fannie and Freddie will also assist them in managing their credit risk and decreases the potential for another taxpayer bailout."
The bill's other sponsor, Rep. Sewell, said, "Fannie Mae and Freddie Mac are the largest mortgage purchasers in the nation, but they rely on credit-score models that don't necessarily take into account something as simple as whether borrowers have paid their rent on time."
Sewell added, "Homeownership is an integral part of the American dream that shouldn't be out of the reach for low-income, rural and minority borrowers who lack access to traditional forms of credit. This legislation takes an important step toward addressing this issue and helps make homeownership a reality for more Americans across the country."
The press release from the bill's sponsors noted, "Fannie and Freddie's 90 percent share of the secondary mortgage market and reliance on one credit-scoring model has created a near monopoly in this field." Fannie and Freddie currently require FICO credit scores for all loans eligible for sale to them.
The release added, "Potential homebuyers without a FICO score or with one below 620 are ineligible for a mortgage that can be sold to Fannie or Freddie, and are often frozen out of the housing market. Lower-to-middle-income Americans that are qualified to buy a home but are unable to gain entry to the market due to their FICO score or lack thereof will specifically benefit from the GSEs using other credit-scoring models."
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|Title Annotation:||NEWS ROOM|
|Comment:||House bill urges GSEs to accept new credit scores.(NEWS ROOM)|
|Date:||Jan 1, 2016|
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