Text: H.R.4211 — 114th Congress (2015-2016)All Information (Except Text)

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Introduced in House (12/10/2015)


114th CONGRESS
1st Session
H. R. 4211


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

December 10, 2015

Mr. Royce (for himself 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 2015”.

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 that, 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

“(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 (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.