October 24, 2022

(Alexandria, VA) — CASE, Consumer Action for a Strong Economy, issued a statement strongly opposing today’s announcement by the Federal Housing Finance Agency (FHFA) approving dual credit scoring models in home mortgages underwritten by Government-Sponsored Enterprises Fannie Mae and Freddie Mac.  The announcement signals that the highly successful single-score model currently guiding lenders will be replaced by a dual-score model that raises more questions than it answers, prompting a statement from CASE Chairman and co-founder Gerard Scimeca:

“Today the FHFA ignored the cardinal rule of “if it ain’t broke, don’t fix it” by approving the use in mortgage lending of a credit scoring model owned jointly by the three credit reporting agencies.  By abandoning the highly successful single-score system that proved critical in helping the housing market roar back from the sub-prime crisis of 2008, FHFA has introduced added risk, uncertainty, and higher costs to mortgage lending when consumers can least afford it.

“We strongly disagree with FHFA’s assertion that a dual scoring system will improve accuracy and enhance safety in mortgage lending; in fact CASE belongs to an extensive coalition of organizations and industry leaders who believe it will do just the opposite.  Scoring models are complex formulas built on neutral, empirical data, and the addition of a second scoring model that nobody within the lending industry was calling for is the equivalent of creating two keys to open one lock.  There is nothing safe or secure in adding a scoring model that differs in any way from the most accurate model on the market, or in disrupting the exceptionally safe, consistent, and reliable system now in place.

“FHFA’s decision also raises costs on consumers.  Accommodating an additional credit scoring model in mortgage lending will require hundreds of millions to billions of dollars in new equipment, software, training protocols, and a host of other expenditures by private lenders and government agencies.  These added costs will ultimately be passed on to borrowers, making home ownership more expensive and difficult to achieve.  In the midst of a tumultuous housing market that has seen double digit price increases, FHFA should be finding ways to make home ownership more affordable, and not burden consumers with thousands of dollars of additional costs.

“Before further steps are taken to implement this proposed dual scoring model system, we believe it would be prudent for all stakeholders, including Congress, to inquire as to what criteria were applied by FHFA to reach this conclusion.  Housing is central to the health of our national economy and represents the single largest asset for the vast majority of American families.  FHFA owes the nation a thorough and detailed explanation of why they chose to ‘fix’ something that nobody thought was broken.”