The Federal Housing Finance Agency has solicited a four-option credit score proposal that deviates from Congressional intent and threatens to harm taxpayers by exposing government-backed Fannie Mae and Freddie Mac to risky mortgages. As inflation surges and interest rates on mortgages are continuing to rise, implementation of a singular, accurate, and cost-efficient credit score model for the secondary mortgage market is essential to ensuring that homebuyers continue to have housing options now and in the future.
Section 310 of the Economic Growth, Regulatory Relief, and Consumer Protection Act did not authorize FHFA to consider four separate options to determine which credit scoring models to use for borrowers when Fannie Mae or Freddie Mac (the enterprises) purchase a mortgage loan. The four options FHFA is considering are whether (1) to use one credit score model (2) require two scores for every loan (3) allow lenders to choose the credit score or (4) use a “waterfall” approach that establishes tiers of credit scores. The FHFA is only supposed to ensure the enterprises conducted the credit score validation and approval processes adequately. This diversion from Congressional intent is unlawful and will likely spur future litigation.
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