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  • Comment Detail

  • Date: 03/06/19
    First Name: vanessa
    Last Name: perry
    Organization: The George Washington University
    City: N/A
    State: N/A
    Attachment: View Attachment
    Number: RIN-2590-AA98

  • Comment

    Dear Mr. Pollard:
    The purpose of this letter is to respond to FHFA’s request for comments on the Validation and Approval of Credit Score Models, presented in the attached. My comments are based on my more than 25 years of research on mortgage lending and access to credit for lower-income and disadvantaged consumers.

    The key issues raised in the proposed rule related to the process for validation and approval of credit score models by the Enterprises. This proposed rule has been informed by several years of scorecard assessments by the GSEs and FHFA as well as responses to the 2017 Credit Scoring RFI.

    In my response to the 2017 Credit Scoring RFI, I expressed skepticism about the benefits of adding a new credit score to the mortgage market. One concern was that adoption of a new score would increase the pool of consumers with poor credit scores who either could not qualify for a mortgage or would enter the subprime market. Another fear was that adopting a new score would expand the already widespread level of confusion among consumers about credit scores. In my opinion, FHFA has done a thorough analysis and careful consideration of these issues and should now proceed without delay to identify new credit scoring models that can expand homeownership opportunities for those who are currently underserved by the status quo.

    Going forward, FHFA should consider the following:
    ● To support competition and encourage innovation, a credit score provider should be independent from the suppliers of credit data;
    ● Going forward, to expand homeownership opportunities, FHFA should enable opportunities to innovate using alternative, non-CRA data;
    ● To create an incentive to innovate via alternative data sources, there must be a viable opportunity for pilot testing of new models, and incentives for Enterprises to consider them;
    ● FHFA should consider carefully the implications for fair lending and expanding access to homeownership when evaluating and testing new scores.
    Best of luck to you and the members of your dedicated team as you consider these alternatives.

    Sincerely,
    Vanessa G. Perry, PhD
    Professor of Strategic Management and Public Policy
    The George Washington University
    School of Business
    vperry@gwu.edu