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bill to end "FICO monopoly" at Fannie and Freddie

House reintroduces bill to end "FICO monopoly" at Fannie Mae and Freddie Mac
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Re: bill to end "FICO monopoly" at Fannie and Freddie

[ Edited ]

I'd be surprised if this went anywhere due to "credit risk" following the "everyone qualifies" LIAR loans that caused the mortgage crisis in 2006-08. While lenders can and do use their own models, there are many flavors of FICO and frankly it has a strong and long history of assessing lender risk. Let me look at little closer at the legislation, I'll edit this post after I actually look at the bill.


Edit Add: Overview: Bill Summary & Status

  • To require Fannie Mae and Freddie Mac to establish procedures for considering certain credit scores in making a determination whether to purchase a residential mortgage, and for other purposes

Only 2 co-sponsors, but it was just introduced yesterday- the full text is not online yet (takes 4-5 days), but one thing to note is that this bill would require these agencies to "consider" for purchase loans made using other than FICO scores - that loophole says that if a lender "qualifies" and issues a mortgage using whatever they term proper documentation to make the loan, that the agencies can "consider purchasing the loan". Frankly you need to find lenders that will actually make loans that don't use FICO scoring to even have it considered for purchase by the quasi-government agencies. Fly by night "everyone qualifies" loan companies already crashed and burned and requirements were revised as far as DTI, debt/asset documentation and other factors making it much harder post crash to qualify in the firsat place. I don't think Congress is in the mood to revisit substandard requirements after the last go round. Since FICO is the standard risk model, I don't see much support for reinventing the wheel after the last crash, especially since the agencies are not required to purchase the loans, just consider the possibility. Note too that Royce is on Financial Services, so it's his kind of bill, but note too that there is growing support in Congress to disband these housing agencies as no longer needs (on top of the compensation their top brass make)


An interesting twist is that both agencies are now "owned" by the USGov, mostly because of the housing bust, which means this bill would have the USGov buying "alternate qualified loans" that disregard standard risk scoring standards - I don't see the point.


There are a lot of bills introduced, during the 114th Congress (2015-16) about 6600 bills were introduced, just over 300 became law and that includes budget measures and naming Post Offices. The 115th Congress has been in session for just over 1 month and over 900 bills have been introduced so far - I won't go into the "why?"  


I'll keep an eye on it, thanks for posting the info.



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Re: bill to end "FICO monopoly" at Fannie and Freddie

i agree with Pipe, this won't happen.

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