Given the current state of the economy, with its skyrocketing home prices and record-setting inflation, introducing new scoring models into the housing market would be a big risk with no identifiable benefits. Supporters claim it creates competition in the credit scoring industry but what it truly offers is unnecessary risk when we can least afford it.
Alternative scores would surely benefit the companies promulgating them, but consumers have no choice which model scores them. Further, there is no evidence these models offer any new innovation or improvement that would help credit worthy homebuyers qualify for loans. FHFA has confirmed this repeatedly over the years in semi-regular assessments of scoring models for their predictive accuracy and thoroughness in scoring borrowers through countless carefully weighted data points. Models that fall short of the current FICO score in accurately assessing risk for lenders do not improve the safety or soundness of our housing market, which must remain paramount.
There is also an issue of added cost. Our nation’s lending infrastructure is heavily standardized through software, banking protocols, and financial verifications. The mortgage lending chain, from the GSEs down to lender institutions, would be required to invest in complex and costly modifications to accommodate an alternative model, costs that would certainly be passed on to borrowers.
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