[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 898 Introduced in House (IH)]
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115th CONGRESS
1st Session
H. R. 898
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.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 7, 2017
Mr. Royce of California (for himself, Ms. Sinema, and Ms. Sewell of
Alabama) introduced the following bill; which was referred to the
Committee on Financial Services
_______________________________________________________________________
A BILL
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.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Credit Score Competition Act of
2017''.
SEC. 2. CREDIT SCORE VALIDATION; VALIDATION PROCESS.
(a) Use of Credit Scores by Fannie Mae in Purchasing Residential
Mortgages.--Subsection (b) of section 302 of the Federal National
Mortgage Association Charter Act (12 U.S.C. 1717(b)) is amended by
adding at the end the following new paragraph:
``(7)(A) Use of credit scores.--The corporation may condition its
purchase of a residential mortgage under this section on the provision
of a credit score for the borrower only if--
``(i) the credit score is derived from any credit
scoring model that has been validated and approved by
the corporation under this paragraph;
``(ii) the corporation has established and made
publicly available a description of the process the
corporation will use to validate and approve credit
scoring models, which process shall comply with any
standards and criteria established by the Director of
the Federal Housing Finance Agency pursuant to section
1328 of the Federal Housing Enterprises Financial
Safety and Soundness Act of 1992; and
``(iii) the corporation provides for the use of
such credit score by all of its automated underwriting
systems and any other procedures and systems used to
purchase residential mortgages.
``(B) Validation and Approval Process.--The process described in
subparagraph (A)(ii) shall include an evaluation of--
``(i) the criteria used to validate and approve a credit
scoring model, including measures of the integrity,
reliability, and accuracy of such model, and an assurance that
such model is consistent with the safe and sound operation of
the corporation; and
``(ii) the data necessary for the validation of the credit
scoring model.
``(C) Application.--If the corporation elects to use a credit score
under this paragraph, the corporation shall solicit applications from
developers of credit scoring models for the validation and approval of
such models under the process described in subparagraph (A)(ii).
``(D) Timeframe for Determination; Notice.--
``(i) In general.--The corporation shall establish a date
before which the corporation shall make a determination with
respect to any application submitted under subparagraph (C) and
provide notice of such determination to the applicant. Such
date shall not be later than 180 days after the date on which
an application is submitted to the corporation.
``(ii) Extensions.--The Director of the Federal Housing
Finance Agency may authorize up to 2 extensions of the date
established under clause (i), each of which shall not exceed 30
days, upon the written request and a showing of good cause by
the corporation.
``(iii) Status notice.--The corporation shall provide
notice to an applicant regarding the status of an application
submitted under subparagraph (C) not later than 60 days after
the date on which the application was submitted to the
corporation.
``(iv) Reasons for disapproval.--If an application is
disapproved, the corporation shall provide to the applicant the
reasons for the disapproval not later than 30 days after a
determination is made under this subparagraph.
``(E) Authority of Director.--If the corporation elects to use a
credit score under this paragraph, the Director of the Federal Housing
Finance Agency shall require the corporation to routinely update the
validation and approval process described in subparagraph (A)(ii) as
the Director, in the Director's discretion, deems to be necessary to
ensure such process remains appropriate and adequate and complies with
any standards and criteria established pursuant to section 1328 of the
Federal Housing Enterprises Financial Safety and Soundness Act of 1992.
``(F) Credit Score Defined.--In this paragraph, the term `credit
score' means a numerical value or a categorization derived from a
statistical tool or modeling system used by a person who makes or
arranges a loan to predict the likelihood of certain credit behaviors,
including default.''.
(b) Use of Credit Scores by Freddie Mac in Purchasing Residential
Mortgages.--Section 305 of the Federal Home Loan Mortgage Corporation
Act (12 U.S.C. 1454) is amended by adding at the end the following new
subsection:
``(d)(1) Use of Credit Scores.--The Corporation may condition its
purchase of a residential mortgage under this section on the provision
of a credit score for the borrower only if--
``(A) the credit score is derived from any credit scoring
model that has been validated and approved by the Corporation
under this subsection;
``(B) the Corporation has established and made publicly
available a description of the process the corporation will use
to validate and approve credit scoring models, which shall
comply with any standards and criteria established by the
Director of the Federal Housing Finance Agency pursuant to
section 1328 of the Federal Housing Enterprises Financial
Safety and Soundness Act of 1992; and
``(C) the Corporation provides for use of such credit score
by all of its automated underwriting systems and any other
procedures and systems used to purchase residential mortgages.
``(2) Validation and Approval Process.--The process described in
paragraph (1)(B) shall include an evaluation of--
``(A) the criteria used to validate and approve a credit
scoring model, including measures of the integrity,
reliability, and accuracy of such model and an assurance that
such model is consistent with the safe and sound operation of
the Corporation; and
``(B) the data necessary for the validation of the credit
scoring model.
``(3) Application.--If the Corporation elects to use a credit score
under this subsection, the Corporation shall solicit applications from
developers of credit scoring models for the validation and approval of
such models under the process described in paragraph (1)(B).
``(4) Timeframe for Determination; Notice.--
``(A) In general.--The Corporation shall establish a date
before which the Corporation shall make a determination with
respect to any application submitted under paragraph (3) and
provide notice of such determination to the applicant. Such
date shall not be later than 180 days after the date on which
an application is submitted to the Corporation.
``(B) Extensions.--The Director of the Federal Housing
Finance Agency may authorize up to 2 extensions of the date
established under subparagraph (A), each of which shall not
exceed 30 days, upon the written request and a showing of good
cause by the Corporation.
``(C) Status notice.--The Corporation shall provide notice
to an applicant regarding the status of an application
submitted under paragraph (3) not later than 60 days after the
date on which the application was submitted to the corporation.
``(D) Reasons for disapproval.--If an application is
disapproved, the corporation shall provide to the applicant the
reasons for the disapproval not later than 30 days after a
determination is made under this paragraph.
``(5) Authority of Director.--If the Corporation elects to use a
credit score under this subsection, the Director of the Federal Housing
Finance Agency shall require the Corporation to routinely update the
validation and approval process described in paragraph (1)(B) as the
Director, in the Director's discretion, deems to be necessary to ensure
such process remains appropriate and adequate and complies with any
standards and criteria established pursuant to section 1328 of the
Federal Housing Enterprises Financial Safety and Soundness Act of 1992.
``(6) Credit Score Defined.--In this subsection, the term `credit
score' means a numerical value or a categorization derived from a
statistical tool or modeling system used by a person who makes or
arranges a loan to predict the likelihood of certain credit behaviors,
including default.''.
SEC. 3. AUTHORITY OF DIRECTOR OF THE FEDERAL HOUSING FINANCE AGENCY.
Subpart A of part 2 of subtitle A of the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4541
et seq.) is amended by adding at the end the following new section:
``SEC. 1328. REGULATIONS FOR USE OF CREDIT SCORES.
``The Director may, by regulation, establish standards and criteria
for any process used by an enterprise to validate and approve credit
scoring models pursuant to section 302(b)(7) of the Federal National
Mortgage Association Charter Act and section 305(d) of the Federal Home
Loan Mortgage Corporation Act.''.
SEC. 4. EFFECTIVE DATE.
The amendments made by this Act shall take effect 180 days after
the date of enactment of this Act.
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