Freddie Mac and Fannie Mae have been relying heavily on the FICO credit scoring model. However, a bipartisan Senate bill is could force them into adopting a new model for future readings.
“I'm focused on encouraging sustainable homeownership over a simple homebuyership. One way to do so is the [Federal Housing Finance Agency] updating the accepted credit scoring models of the GSEs,” said Senator Tim Scott at a Senate Banking Committee hearing in July, according to National Mortgage News.
“If a family pays their utility bills or their phone bills on time for a decade, it ought to count towards their ability to have a home.”
The Senate has been working with the two mortgage giants to agree on a model that works best for borrowers. Though, some believe that this process will take some time and incur added costs.
“Adding more credit scoring models to the market would require some data validations … time periods that adds costs,” said Brenda Hughes, senior vice president at the $624 million-asset First Federal Savings Bank of Twin Falls in Idaho, according to the report.
To learn more about the process of changing the credit score evaluation for borrowers, click on the image above.