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CHLA to FHFA: Could we please slow down on credit score reporting changes?

The letter to FHFA says that slower implementation will allow a more thorough, transparent process to play out

The Community Home Lenders of America (CHLA) on Thursday sent a letter to Sandra Thompson, director of the Federal Housing Finance Agency (FHFA), urging the slower implementation of changes to the credit score reporting process.

The letter, which was also sent to the CEOs of Fannie Mae and Freddie Mac, expresses appreciation to FHFA for “its efforts to improve the credit score reporting process and to offer more mortgage access with lower costs in mortgage transactions,” the letter said.

But CHLA, which represents smaller lenders, supports a slower implementation timeline, saying that it will allow for access to more data and a more robust engagement process that will be critical in providing feedback about proposed changes.

“We also believe that it will be important to engage with credit score stakeholders such as [the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA)] and Ginnie Mae,” the letter reads in part. “Our position was outlined in the recent industry letter issued on June 22, 2023, which argued for a slower implementation schedule. CHLA understands and appreciates that FHFA is seriously considering this feedback.”

In March, FHFA announced proposed implementation timelines for the use of the FICO 10T and the VantageScore 4.0 credit score models by Fannie Mae and Freddie Mac. The government-sponsored enterprises also plan to transition to two, rather than three, credit reports from the national consumer reporting agencies within a year.

In its letter, however, CHLA has recommended that the FICO 10T requirement be “deferred to a later phase,” and that more incremental steps be taken to slow the process.

“We are also concerned about expanding FICO’s role, considering the 400% credit report price increase FICO imposed last year,” the letter said. “In our November 30, 2022 letter to FHFA, we argued that Fannie and Freddie have the legal authority to establish conditions for such loans, asking FHFA to roll back the 400% price increase. CHLA also argued that arbitrarily exempting some 54 larger lenders from this price hike was discriminatory against smaller lenders, and that it violated at least the spirit of FHFA’s permanent policy of guarantee fee (G – Fee) parity.”

Expanding FICO’s authority without addressing the 400% price increase and its “violation” of the parity policy would be inadvisable, the letter concluded.

At a hearing in May, members of Congress asked Director Thompson about the move to transition to two credit reports as opposed to three, in what’s called a “bi-merge” credit model. Thompson said that the rationale is that such a move would benefit consumers.

“We believe after analysis that moving from three credit scores to two is going to be beneficial for the borrowers, and it will encourage competition from the credit reporting agencies,” Thompson said during the May hearing. “And it would lower costs for the borrowers because instead of three credit reports, they only pull two, and then the lender picks which two those are.”

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