If you work in the mortgage industry, you know what a FICO score is. Fair Isaac Corporation is a benchmark of credit score modeling used by the mortgage industry. In 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act passed which required Fannie Mae and Freddie Mac to solicit third-party credit scoring models that the GSE’s can use.

The GSE’s issued a joint solicitation in February seeking possible alternatives to the FICO model which for years has been the only credit score the GSE’s accepted. The major credit agencies, Equifax, TransUnion, and Experian, have fought for years to gain entry to the GSE market, including taking the matter to court.

The Federal Housing Finance Agency (FHFA) announced on Tuesday that it has validated and reapproved the Classic FICO credit score model for use by Fannie Mae and Freddie Mac for assessing the creditworthiness of mortgage borrowers. The Agency said this would allow the GSEs “to continue supporting the mortgage market while assessing more modern credit score models that were submitted in response to the 2020 Joint Enterprise Credit Score Solicitation.”

FHFA called the approval of the FICO product an incremental step in meeting the requirements of the Act. It said it expects it will take the GSEs an additional year to complete the validation and approval process of the remaining credit score models submitted in response to the solicitation. Other scoring models in contention are Vantage, Experian, and TransUnion.

Let me know if you have any questions or would like any estimates! Stay healthy!

 

by Andrew Augustyniak, Branch Manager/Loan Officer, Peoples Mortgage Company