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  • Comment Detail

  • Date: 03/21/19
    First Name: The Honorable David N.
    Last Name: Cicilline
    Organization: N/A
    City: N/A
    State: N/A
    Attachment: View Attachment
    Number: RIN-2590-AA98

  • Comment

    See attached for full letter. Text enclosed below.

    March 21, 2019

    The Honorable Joseph Otting
    Acting Director
    Federal Housing Finance Agency
    400 Seventh Street SW
    Washington D.C. 20219

    Re: Validation and Approval of Credit Score Models (RIN 2590-AA98)

    Dear Acting Director Otting,

    I write to urge the Federal Housing Finance Agency (FHFA) to carefully consider the impact of the proposed rule on competition in the market for credit scores, consumer rights, and access to credit.

    Buying a home is the single most important financial decision many Americans will make in their lives. Owning a home is a primary means by which Americans accumulate wealth, and children born into homeowning families enjoy life-long advantages, including being more likely to become homeowners themselves. Importantly, promoting homeownership helps to address income inequality that have served as persistent barriers to wealth accumulation for communities of color. Credit score models should compete with one another on accuracy and reliability while enabling more consumers to access home loans.

    The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 required the FHFA to establish a process for approving third-party credit scores for use by Fannie Mae and Freddie Mac. Pursuant to the Act, the FHFA proposed a rule establishing a four-phase validation and approval process to examine proposed scoring models, particularly for “accuracy, reliability, and integrity.” Importantly, the proposed rule is also an opportunity for the FHFA to consider whether to adopt additional credit-scoring models besides the Classic FICO model for their loan-purchase programs and underwriting systems.

    Under the proposed rule, Fannie and Freddie could not approve a credit score model “developed by a company that is related to a consumer data provider through any common ownership or control, of any amount.” The proposed rule notes that the FHFA has not identified an amount of common ownership that would address its concerns, and therefore, any common ownership, “even a minority ownership interest would be subject to the prohibition.” Left unchanged, this prohibition would effectively rule out using an alternative credit-scoring model, VantageScore, which is owned jointly by the credit reporting agencies (CRAs)—Experian, Equifax, and TransUnion.

    While I take no position as to whether VantageScore should or should not be used, I suggest that this provision in the proposed rule be re-visited, as competition among credit score models may serve as an opportunity to promote homeownership by increasing access to credit. Lack of competition in this market should not be allowed to stand in the way of the millions of American families who could otherwise own a home. This marketplace should serve these vital national interests.

    Sincerely,

    David N. Cicilline
    Chairman
    Subcommittee on Antitrust, Commercial and Administrative Law
    Committee on the Judiciary
    U.S. House of Representatives