FHFA approves final rule allowing GSE’s to use third-party credit score models

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The Federal Housing Finance Agency (FHFA) signed off on a rule that says third-party credit score models that can be used by government-sponsored entities, including Fannie Mae and Freddie Mac.

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The rule implements the requirements in Section 310 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which was enacted on May 24, 2018.

The regulation requires a process for validation and approval of credit score models. The first phase calls for the solicitation of applications from credit score model developers. The second phase is the submission and initial review of submitted applications. The third phase is a credit score assessment, while the final step is an enterprise business assessment.

“One of my priorities is to ensure that the American people have a safe and sound path to sustainable homeownership, which requires tools to accurately measure risk,” FHFA Director Mark Calabria said. “The final rule we are publishing today is an important step toward achieving that goal.”

The rule will become effective 60 days after it is published in the Federal Register. Within 60 days of this effective date, FHFA will begin a review of the materials that the government-sponsored entities plan to use in the public solicitation process. After FHFA approves those materials, the GSE’s will make public the details of the solicitation process. FHFA will then determine the date that the initial solicitation will open for credit score model developers to apply.

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