FHFA Validates GSEs’ Use of Classic FICO Credit Score Model

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The Federal Housing Finance Agency (FHFA) has given Fannie Mae and Freddie Mac the green light to use the Classic FICO credit score model for mortgage loan underwriting – but says it will take “an additional year to complete the validation and approval process” of the remaining third-party credit score models it has been considering.

In February, Fannie Mae and Freddie Mac solicited feedback from the lending industry as a “first step in the process of evaluating new credit score models.” These include new credit scoring models – which rely on bank statement data as well as alternative sources of credit information, such as utility bills – are geared for self-employed borrowers or borrowers with little to no credit history.

The development of and transition to new credit score models has been several years in the making.

“[The] FHFA will ensure that the enterprises validate and approve credit score models in a timely and prudent manner, so that Americans continue to have a safe and sound path to sustainable homeownership,” FHFA Director Mark Calabria said in February.

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