Sec. 310. CREDIT SCORE COMPETITION

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## SEC. 310 CREDIT SCORE COMPETITION ###

(a)Use of Credit Scores by Fannie Mae in Purchasing Residential Mortgages Section 302(b) of the Federal National Mortgage Association Charter Act (12 U.S.C. 1717(b)) is amended by adding at the end the following: > > #### “(7) > > > #####

(A)Definitions > > In this paragraph— > > > ###### “(i) > > the term ‘credit score’ means a numerical value or a categorization created by a third party 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; and > > > ###### “(ii) > > the term ‘residential mortgage’ has the meaning given the term in section 302 of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1451). > > > ##### “(B) Use of Credit Scores > > The corporation shall condition purchase of a residential mortgage by the corporation under this subsection 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; and > > > ###### “(ii) > > the corporation provides for the use of the credit score by all of the automated underwriting systems of the corporation and any other procedures and systems used by the corporation to purchase residential mortgages that use a credit score. > > > ##### “(C) Validation and Approval Process > > The corporation shall establish a validation and approval process for the use of credit score models, under which the corporation may not validate and approve a credit score model unless the credit score model— > > > ###### “(i) > > satisfies minimum requirements of integrity, reliability, and accuracy; > > > ###### “(ii) > > has a historical record of measuring and predicting default rates and other credit behaviors; > > > ###### “(iii) > > is consistent with the safe and sound operation of the corporation; > > > ###### “(iv) > > complies with any standards and criteria established by the Director of the Federal Housing Finance Agency under section 1328(1) of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992; and > > > ###### “(v) > > satisfies any other requirements, as determined by the corporation. > > > ##### “(D) Replacement of Credit Score Model > > If the corporation has validated and approved 1 or more credit score models under subparagraph

(C)and the corporation validates and approves an additional credit score model, the corporation may determine that— > > > ###### “(i) > > the additional credit score model has replaced the credit score model or credit score models previously validated and approved; and > > > ###### “(ii) > > the credit score model or credit score models previously validated and approved shall no longer be considered validated and approved for the purposes of subparagraph (B). > > > ##### “(E) Public Disclosure > > Upon establishing the validation and approval process required under subparagraph (C), the corporation shall make publicly available a description of the validation and approval process. > > > ##### “(F) Application > > Not later than 30 days after the effective date of this paragraph, the corporation shall solicit applications from developers of credit scoring models for the validation and approval of those models under the process required under subparagraph (C). > > > ##### “(G) Timeframe for Determination; Notice > > > ###### “(i) In general > > The corporation shall make a determination with respect to any application submitted under subparagraph (F), and provide notice of that determination to the applicant, before a date established by the corporation that is not 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 not more than 2 extensions of the date established under clause (i), each of which shall not exceed 30 days, upon a 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

(F)not later than 60 days after the date on which the application was submitted to the corporation. > > > ###### “(iv) Reasons for disapproval > > If an application submitted under subparagraph

(F)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. > > > ##### “(H) Authority of Director > > If the corporation elects to use a credit score model under this paragraph, the Director of the Federal Housing Finance Agency shall require the corporation to periodically review the validation and approval process required under subparagraph

(C)as the Director determines necessary to ensure that the process remains appropriate and adequate and complies with any standards and criteria established pursuant to section 1328(1) of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992. > > > ##### “(I) Extension > > If, as of the effective date of this paragraph, a credit score model has not been approved under subparagraph (C), the corporation may use a credit score model that was in use before the effective date of this paragraph, if necessary to prevent substantial market disruptions, until the earlier of— > > > ###### “(i) > > the date on which a credit score model is validated and approved under subparagraph (C); or > > > ###### “(ii) > > the date that is 2 years after the effective date of this paragraph.” > . ###

(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: > > ### “(d) > > > ####

(1)Definition > > In this subsection, the term ‘credit score’ means a numerical value or a categorization created by a third party 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. > > > #### “(2) Use of Credit Scores > > The Corporation shall condition purchase of a residential mortgage by the Corporation 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; and > > > ##### “(B) > > the Corporation provides for the use of the credit score by all of the automated underwriting systems of the Corporation and any other procedures and systems used by the Corporation to purchase residential mortgages that use a credit score. > > > #### “(3) Validation and Approval Process > > The Corporation shall establish a validation and approval process for the use of credit score models, under which the Corporation may not validate and approve a credit score model unless the credit score model— > > > ##### “(A) > > satisfies minimum requirements of integrity, reliability, and accuracy; > > > ##### “(B) > > has a historical record of measuring and predicting default rates and other credit behaviors; > > > ##### “(C) > > is consistent with the safe and sound operation of the corporation; > > > ##### “(D) > > complies with any standards and criteria established by the Director of the Federal Housing Finance Agency under section 1328(1) of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992; and > > > ##### “(E) > > satisfies any other requirements, as determined by the Corporation. > > > #### “(4) Replacement of Credit Score Model > > If the Corporation has validated and approved 1 or more credit score models under paragraph

(3)and the Corporation validates and approves an additional credit score model, the Corporation may determine that— > > > ##### “(A) > > the additional credit score model has replaced the credit score model or credit score models previously validated and approved; and > > > ##### “(B) > > the credit score model or credit score models previously validated and approved shall no longer be considered validated and approved for the purposes of paragraph (2). > > > #### “(5) Public Disclosure > > Upon establishing the validation and approval process required under paragraph (3), the Corporation shall make publicly available a description of the validation and approval process. > > > #### “(6) Application > > Not later than 30 days after the effective date of this subsection, the Corporation shall solicit applications from developers of credit scoring models for the validation and approval of those models under the process required under paragraph (3). > > > #### “(7) Timeframe for Determination; Notice > > > ##### “(A) In general > > The Corporation shall make a determination with respect to any application submitted under paragraph (6), and provide notice of that determination to the applicant, before a date established by the Corporation that is not 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 not more than 2 extensions of the date established under subparagraph (A), each of which shall not exceed 30 days, upon a 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

(6)not later than 60 days after the date on which the application was submitted to the Corporation. > > > ##### “(D) Reasons for disapproval > > If an application submitted under paragraph

(6)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. > > > #### “(8) 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 periodically review the validation and approval process required under paragraph

(3)as the Director determines necessary to ensure that the process remains appropriate and adequate and complies with any standards and criteria established pursuant to section 1328(1) of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992. > > > #### “(9) Extension > > If, as of the effective date of this subsection, a credit score model has not been approved under paragraph (3), the Corporation may use a credit score model that was in use before the effective date of this subsection, if necessary to prevent substantial market disruptions, until the earlier of— > > > ##### “(A) > > the date on which a credit score model is validated and approved under paragraph (3); or > > > ##### “(B) > > the date that is 2 years after the effective date of this subsection.” > . ###

(c)Authority of the Director **[**[12 U.S.C. 4548](/us/usc/t12/s4548)**]** 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: > > ## “SEC. SEC. 1328 REGULATIONS FOR USE OF CREDIT SCORES > > The Director shall— > > > #### “(1) > > 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 (12 U.S.C. 1717(b)(7)) and section 305(d) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(d)); and > > > #### “(2) > > ensure that any credit scoring model that is validated and approved by an enterprise under section 302(b)(7) (12 U.S.C. 1717(b)(7)) of the Federal National Mortgage Association Charter Act or section 305(d) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(d)) meets the requirements of clauses (i), (ii), and

(iii)of section 302(b)(7)(C) of the Federal National Mortgage Association Charter Act and subparagraphs (A), (B), and

(C)of section 305(d)(3) of the Federal Home Loan Mortgage Corporation Act, respectively.” > . ###

(d)Effective Date **[**[12 U.S.C. 1454 note](/us/usc/t12/s1454)**]** The amendments made by subsections

(a)and

(b)shall take effect on the date that is 180 days after the date of enactment of this Act.

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Sec. 310

CREDIT SCORE COMPETITION

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