Reps. Ed Royce (R-CA), Kyrsten Sinema (D-AZ), and Terri Sewell (D-AL) introduced the legislation that would allow Fannie Mae and Freddie Mac to consider alternative credit scoring models when making mortgage purchasing decisions.
Fannie Mae and Freddie Mac use a single credit scoring model to make mortgage purchasing decisions. The Credit Score Competition Act directs the Federal Housing Finance Agency (FHFA) to up the government-sponsored entities (GSEs) to alternative models that may consider rent and utility payments. The bill sponsors believe it will open the market to those who previously could not enter.
“Alternative credit score consideration by the GSEs is a win-win: it opens up the market in a responsible manner for those qualified to buy a home and eliminates the government-backed monopoly in credit scoring,” Royce said. “That’s why the Credit Score Competition Act has garnered such strong bipartisan support.”
Sinema said many fiscally responsible citizens do not qualify for government-backed mortgages because of a flawed credit-scoring system.
“Fannie Mae and Freddie Mac should have the ability to look beyond traditional forms of credit and take into account factors including whether or not borrowers pay their rent on time,” said Sinema, who sits on the House Financial Services Committee with Royce.
Home ownership should not be out of the reach for low-income, rural, and minority borrowers who lack access to credit, Sewell, a member of the House Ways and Means Committee, said.
“This legislation takes an important step towards addressing this issue and helps make home ownership a reality for more Americans across the country,” Sewell said.