U.S. Sens. Mike Rounds (R-SD), Thom Tillis (R-NC), and Steve Daines (R-MT) joined five of their GOP colleagues on the U.S. Senate Banking, Housing, and Urban Affairs Committee in calling on the Federal Housing Finance Agency (FHFA) to quickly and effectively implement reforms to credit scoring models.
The senators urged the FHFA in its ongoing transition to and implementation of updated credit score models and credit report requirements for loans acquired by Fannie Mae and Freddie Mac to adhere to the current timeline for implementation of Section 310 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, signed into law in 2018.
“Implementing Section 310 provides an opportunity to make the credit scoring models our housing market relies on more fair and accurate, without lowering standards needed to qualify for a mortgage,” according to an Oct. 15 letter the committee members sent to FHFA Director Sandra Thompson. “Thus, it is critical that FHFA adhere to the current timeline for implementation of this law and take efforts to prepare stakeholders for this transition without delay.”
The senators also pushed Thompson to abandon plans to transition from the current requirement that lenders provide credit reports from all three (tri-merge) national consumer reporting agencies to only two (bi-merge), arguing the move would negatively impact access to credit.
“FHFA’s decision to implement the bi-merge would inherently result in incomplete data being reported to [Fannie Mae and Freddie Mac],” wrote the senators. “This decision is seemingly at odds with the implicit goal of Section 310, which is to allow for consideration of more data to increase predictiveness of credit models.
“Reducing the information that lenders are required to provide through the bi-merge credit report requirement may harm prospective borrowers and increase risk within our housing market,” they added.
Additionally, while encouraged to see FHFA’s announcement that it would conduct additional public engagement and to delay transition to a bi-merge credit report, the senators noted that listening sessions alone aren’t a substitution for a formal rulemaking, and pairing the delay of the bi-merge implementation with that of Section 310 risks slowing implementation of Section 310, which they called “an unacceptable outcome” since it became law over five years ago.
“We encourage you to abandon plans to transition from a tri-merge to the bi-merge credit report which run counter to the spirit of Section 310 and afoul of the traditional process for notice-and-comment rulemaking,” wrote the lawmakers. “We cannot afford a reduction in the accuracy and predictive power of data provided to the taxpayer-backed [Fannie Mae and Freddie Mac] with no meaningful benefits for consumers.”