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NAFCU is asking members for feedback on the Federal Housing Finance Agency's (FHFA) request for input on whether to change the current credit score requirements for the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.

The GSEs have already conducted empirical evaluations on the credit score models being considered: Classic FICO, FICO 9 and VantageScore 3.0. In its Regulatory Alert sent to member credit unions Tuesday, NAFCU outlines the four options the FHFA is considering, including:

• Single score, in which the GSEs would require delivery of a single score – either FICO 9 or VantageScore 3.0 – if available on every loan.
• Requiring both, in which the GSEs would require delivery of both scores, if available, on every loan and require policy decisions about how to treat borrowers with a credit score from one provider but not the other.
• Lender choice, with lenders allowed to deliver loans with either score when available but required to choose one score or the other for a defined period of time. This would require policy decisions as to length of time, whether to require mortgage aggregators and brokers to adopt a single score approach, or whether to allow them to aggregate loans underwritten with either score.
• Waterfall, in which the GSEs would allow delivery of multiple scores through a waterfall approach that would establish a primary credit score and secondary credit score. If a borrower did not have a credit score under the primary score, a lender would have the option to provide the second credit score.

The FHFA's request for information also includes operational considerations for each of the options.

Member credit unions can submit comments to NAFCU on the request through its Regulatory Alert until Jan. 29. Comments are due to the FHFA by Feb. 20.

The FHFA has already modified rules for Fannie Mae and Freddie Mac to allow, through their automated underwriting systems, the purchase of loans to borrowers who do not have credit scores. The program requires lenders to certify borrowers' repayment histories on nontraditional forms of credit, such as rent payments or utility bills.

NAFCU supports regulatory and legislative efforts to allow for the consideration and use of alternative models in order to bring more competition among credit score providers in the mortgage market; doing so will help unbanked and underbanked consumers.

In a letter last year, NAFCU and other trade groups requested the FHFA work with industry stakeholders before moving forward with new or alternative GSE credit score models. FHFA Director Mel Watt has previously indicated a change in credit scoring models wouldn't happen until mid-2019.

NAFCU also supports legislation introduced in July, the Credit Score Competition Act (S. 1685), which would authorize the FHFA to set standards and criteria for any process used by the enterprises to validate and approve credit scoring models.