FHFA Announces Timeline for Termination of FICO Classic Credit Model

He Federal Housing Finance Agency (FHFA) announced proposed implementation timelines for the use of FICO 10T and VantageScore 4.0 credit scoring models by fanny mae and freddy mac. Together, the government-sponsored businesses also plan to transition to two, instead of three, credit reports from national consumer reporting agencies within one year.

Under the proposed implementation schedule, the FHFA would assemble industry feedback in the second quarter of 2023, publish Classic FICO data to support credit report update in Q4 2023, and move to bi-merge from tri-merge in Q1 2024. FHFA would begin delivering and disclosing historical FICO 10T and VantageScore data 4.0 to support credit model updates in Q1 2025. By Q4 2025, FHFA will have incorporated credit scoring model updates into principal and pricing.

“These changes are expected to further support accuracy, innovation, and inclusiveness in credit scoring models and reduce costs and encourage innovation in credit reporting requirements,” the FHFA said in a statement Thursday.

When the Classic FICO model change was announced in October, FHFA said the changes would result in new payment histories for borrowers, including rent, utility and telecommunications payments for the first time.

Although the new credit model represents a welcome change for much of the industry, several stakeholders have raised concerns about FICO’s pricing changes in recent months.

In a letter dated November 22, the National Consumer Reporting Agency told its members that the “vast majority” of mortgage lenders would see price increases between 10% and 400% of Isaac’s Fair Corporation. (FICO).

The letter, signed by NCRA Executive Director Terry Clemans, read there would be “a wholesale price increase of less than 10% for the top tier of about 46 lenders, about 200% for about 6 lenders in the mid-tier, and more than 400% for all other mortgage lenders in the country.”

In a statement to HousingWire, FICO at the time said its price remains “extremely low compared to the value that the FICO Score provides as one of the most important components in facilitating approximately $2 trillion in mortgage originations each year, and disproportionately low compared to their royalty rates for other markets.”

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