“Paralyze resistance with persistence.” — Woody Hayes
For those of you who aren’t college football historians, Woody Hayes was the legendary coach who led the Ohio State Buckeyes for 28 seasons, winning five national championships.
His quote seems perfectly appropriate for the important news I am pleased to share with you. On May 24, the president of the United States signed The Economic Growth, Regulatory Relief and Consumer Protection Act (S.2155). Included in the bill is a provision that is intended to finally break the status quo where the government requires lenders to use outdated and unnecessarily restrictive FICO models.
As to Coach Hayes’ quote, when I took the job as president & CEO of VantageScore Solutions in 2006, we were aware that FICO was completely entrenched in many credit categories and that it would be particularly challenging to break into the mortgage market because Fannie Mae and Freddie Mac required lenders to use outdated versions of FICO’s model.
Twelve years after we initially called on Fannie Mae’s president in 2006, and after countless meetings and a Herculean four-year grassroots campaign, we are nearly across the finish line. Indeed, Section 310 of the aforementioned bill mandates that the Federal Housing and Finance Agency (FHFA) develop a process to recognize competitive credit scoring models.
With the passing of this legislation, millions of consumers who have been underserved by the current mortgage finance system may soon have a fairer shot at the American dream of sustainable homeownership. Today’s models are more predictive and more inclusive, and they should be put to work.
We thank the members of Congress for recognizing this problem and seizing an opportunity to create a better system. We also look forward to working with all the stakeholders to ensure that the future marketplace is fair and inclusive and fosters competition.
Senator Tim Scott (R-SC) and Representative Ed Royce (R-CA) were instrumental in this legislation, and their passion for credit score competition and sustainable homeownership is inspiring. Recently, Senator Scott actually followed up the passage of the bill with some comments for the record relating to a recent hearing. His comments were as follows:
The Senate and House have passed my legislation, the Credit Score Competition Act, to create a transparent validation process for which credit scoring models can be accepted by the GSEs.
I think doing so will ultimately benefit creditworthy Americans that are trying to achieve homeownership.
The legislation has the word “competition” in its title, and that’s the key: It was my intent that multiple, statistically sound credit scoring models could be used by the GSEs.
It warrants mentioning that FICO fought (and continues to fight) this effort through an aggressive, expensive and ethically questionable advertising campaign. Despite their onslaught of misinformation and scorched-earth approach, the facts prevail.
This a great win for consumers, lenders, competition and, yes…for VantageScore as well. All we ever wanted was the opportunity to compete with FICO on a level playing field and on the basis of how well our models perform. I firmly believe that we’ll see new model developers enter the competition as well. With this legislation now signed into law, we are one giant step closer to making that happen in the mortgage market.