Legislation that would force the government-sponsored housing enterprises to allow multiple credit-scoring models has been introduced in the Senate.
On Tuesday, the
Credit Score Competition Act was introduced. The bill was unveiled at a Senate Finance hearing on affordable housing.
Behind the legislation is Sen. Tim Scott, a Republican from South Carolina, and Sen. Mark Warner, a Democrat from the Commonwealth of Virginia.
The bill would direct the Federal Housing Finance Agency to create a mechanism that opens up Fannie Mae and Freddie Mac to alternative empirically derived and statistically sound credit scoring models.
The proposed law is companion legislation for H.R. 898,
Credit Score Competition Act, which was introduced in the House last February by Rep. Ed Royce (R-California), Rep. Kyrsten Sinema (D-Arizona) and Rep. Terri Sewell (D-Alabama).
House lawmakers have previously said the bill enables Fannie and Freddie to consider alternative credit-scoring models. The bill promises to end the government-backed monopoly in credit scoring, enable non-traditional creditors to impact scores, and increase the number of borrowers who would qualify for GSE programs.
While a media representative for FICO didn’t immediately respond to a request for a statement, VantageScore Solutions issued a statement indicating that the aim of the legislation is to end FICO’s government-sanctioned monopoly in the mortgage industry.
VantageScore Solutions President and Chief Executive Officer Barrett Burns applauded the bill’s introduction in the company’s statement.
“No single company should have a government-sanctioned monopoly, especially when there are millions of consumers that are negatively impacted,” Burns said. “Infusing competition into this integral area will improve fairness, transparency, and inclusiveness without compromising on standards.
“Allowing each lender to choose the credit scoring model best for its business is in the short- and long-term best interest of the housing finance industry and the consumers they serve.”
