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NAFCU joined with several other housing finance stakeholders to share feedback on the Federal Housing Finance Agency’s (FHFA) new credit score requirements for the government-sponsored enterprises (GSEs). NAFCU has supported the use of alternative credit scoring models that more accurately capture creditworthy borrowers and offer them access to affordable credit.

The new requirements mandate institutions that sell to the GSEs to replace the classic FICO model with the FICO 10T and the VantageScore 4.0. There will also be a transition from requiring three credit reports to two. The GSEs last month held a webinar detailing the timeline.

In the letter to FHFA, the groups shared concerns about the current proposed timeline, noting that “we are concerned that the plan doesn’t include sufficient time, flexibility, or detail to effectively execute this extraordinary effort.”

The groups also argued “the plan does not reflect an agile and iterative process to incorporate stakeholder feedback.” They suggested the agency revise the implementation plan to include:

• a comprehensive, transparent, and iterative stakeholder engagement process;
• robust data transparency, specifically including the release of long-term historical datasets for Classic FICO, FICO 10T, and VantageScore 4.0, that allow for analysis of the impacts of the changes and the design of new models to support the wide array of business functions that will be affected; and
• a recalibrated timeline that accommodates both data analysis and modeling as well as a stakeholder engagement process that considers the costs, complexity, consumer impact, and policy implications of the transition.  

“Already, we expect that one external complication that could affect the timeline is government agency adoption of the new scoring models,” the groups wrote. “We anticipate that the Enterprises may need to advise the government lending programs, to assist with simultaneous policy updates to maintain existing underwriting pathways between programs. Without this type of coordination and concurrent adoption, there could be significant consumer confusion and operational backlog, should a prospective borrower change loan programs.”

NAFCU will continue to advocate with the FHFA for policies that promote sustainable and equitable access to affordable housing and ensure the credit union industry’s best interests in the housing finance system.