Reps. Sewell and Royce Push to Remove Barriers to Homeownership
Today, Congresswoman Terri Sewell and Republican Congressman Ed Royce (CA-40) introduced H.R. 4211, the Credit Score Competition Act of 2015. The bill allows Fannie Mae and Freddie Mac to consider alternate credit scoring models when making mortgage lending decisions.
“Fannie Mae and Freddie Mac are the largest mortgage purchasers in the nation, but they rely on credit score models that don’t necessarily take into account something as simple as whether borrowers have paid their rent on time. Home ownership is an integral part of the American Dream that shouldn’t be out of the reach for low-income, rural, and minority borrowers who lack access to traditional forms of credit. This legislation takes an important step towards addressing this issue and helps make homeownership a reality for more Americans across the country,” said Rep. Sewell.
“The Credit Score Competition Act of 2015 allows Fannie Mae and Freddie Mac to consider modern and updated credit scoring models that give more creditworthy buyers access to affordable, home mortgages. It is my hope that this critically important legislation will help make homeownership a reality for many of the hard-working men and women living in Alabama’s 7th Congressional District,” she added.
“Breaking up the credit score monopoly at Fannie and Freddie will assist them in managing their credit risk and avoiding the need for another taxpayer bailout," said Rep. Royce. “The GSEs' use of a single credit score stifles innovation and affordability in the credit scoring field and bars millions of qualified homebuyers from purchasing a home."
About the Credit Score Competition Act of 2015
Fannie Mae and Freddie Mac currently evaluate their ability to purchase a mortgage based exclusively on a consumer’s Fair Issac Corporation (FICO) credit score. FICO scores are based on models and data from 1995 to 2000 that unnecessarily excludes millions of qualified borrowers.
The Credit Score Competition Act of 2015 enables Fannie and Freddie to use updated and alternative credit score models that are empirically derived, and both demonstrably and statistically sound. Without lowering credit standards, updated credit scoring models will allow for a more holistic evaluation of a borrowers’ creditworthiness.
Moreover, establishing and preserving a competitive credit scoring marketplace by eliminating the Fannie and Freddie FICO monopoly will also foster innovation in the field and more affordable credit score products for consumers.
Reps. Royce and Sewell, both members of the House Financial Services Committee, urge swift action from their colleagues to advance this legislation.