May 24th 2022
The many standards by which we navigate our daily lives are never established by caprice or whim, but out of practicality and necessity. Whether you drive a 10-year-old Camry, a new Tesla, or a vintage Beetle, you do so knowing your accelerator pedal is always to the right of the brake. Were a carmaker to suddenly alter this arrangement, our driving instincts would go haywire, with results both predictable and dire. Similarly, rearranging the letters on a computer keyboard, the layout of which can be traced back to the telegraph, would produce throbbing headaches of frustration for billions of people around the globe whose fingers have spent a lifetime knowing precisely where each letter is located.
From the placement of keys or strings on musical instruments to the shape, colors, and lettering of road signs, standards surround us, protect us, and ease our lives. They provide practicality, accessibility, and stability.
Yet at a time when our economy is facing countless challenges and continues to send loud signals of instability not seen since the financial crisis of 2008, a federal agency charged with the specific mission of ensuring stability and policing risk in the housing industry is considering a proposal that would abolish the proven standard upon which the mortgage industry relies to determine creditworthiness.
Despite this historically recent example of the havoc that can be wrought by altering the standards of a $10 trillion industry, the FHFA is still weighing whether to allow an unproven scoring model owned by credit bureaus to be used in mortgages underwritten by Fannie Mae and Freddie Mac. The answer is overwhelmingly clear that it should not.
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