FHFA promises flexibility on deadline for new credit score process

Policymakers on Monday said they have some plans to address several industry concerns on issues regarding credit scoring, counterparty requirements, accessory dwelling units and the availability of assistance for distressed borrowers.

"We're very aware of the many challenges out there," Federal Housing Commissioner Julia Gordon told attendees at the Mortgage Bankers Association's National Secondary Market Conference during a government-related lending and servicing panel.

Numbering among these for the Federal Housing Finance Agency were issues associated with credit scores, which the government-sponsored enterprises it oversees have been working to update. The transition from Classic FICO, which has been used by the enterprises for over 20 years, to FICO 10T and VantageScore 4.0, is expected to have a "multi-year implementation" period.

Some stakeholders have been worried about the estimated date for the transition to a new credit regime. But an official assured attendees at an industry conference the timeline is "soft."

"The change going to the two new credit score models from the current one, we know that that's a multiyear process," said Naa Awaa Tagoe, deputy director, FHFA division of housing mission and goals. "Currently, the estimate is at the end of 2025, but … the types of data that stakeholders need to recalibrate, views of risk, etc., all of that will inform the timeline."

Tagoe also reiterated that the FHFA also would be looking for input in decisions about its new pricing regime, which multiple Republican members of Congress have sought to roll back. 

"Which groups should get a subsidy? Should we have risk-based pricing or not? We're … seeking active feedback," she said.

Ginnie Mae President Alanna McCargo said her agency has been inviting dialogue with the industry on the agency's risk-based capital rule for nonbanks going into effect at year-end 2024 to see whether it "can allow for more tailored approaches to risk management in the future."

She noted that other components of Ginnie's counterparty standards, which it coordinated with the FHFA, remain on track to take effect at the end of the third quarter of this year. Monitoring to date suggests that most issuers will meet these net worth and liquidity requirements, McCargo said.

Meanwhile, the Federal Housing Administration has been taking some steps that could help mortgage companies do more to serve their borrowers in ways that could boost volume and improve loan performance, Gordon said.

The FHA has continued to focus on distressed borrowers "who still have not recovered from the pandemic, who may still be in forbearances, to make sure that they have as many tools as possible to get back to reperforming" even as higher rates complicate the process, she said.

It also is on the verge of publishing changes to its accessory dwelling unit policy that will allow borrowers to count the rental income from ADUs as they qualify for mortgages, said Gordon.

Lenders also have been hopeful the administration would add more ability to finance detached ADUs to expand the types and amount of affordable housing available, but Gordon noted that this could be a bigger challenge.

"This is a 203(k) limitation that we would have to get changed by Congress," she said.

Lenders have said that where accessory dwelling units are allowed by local zoning they've boosted homeownership in multiple ways.

"ADUs create more generational wealth, higher property values and sources of incomes for the household," said Matthew VanFossen, CEO of Absolute Home Mortgage Corp., in an interview. "They can keep the family together if the parents are coming out of another home."