America was constructed by those who were given the opportunity to reap the bounties of their hard work, building equity in a home and wealth for their families. Just as competition works as a positive force in nearly every other element of our economy, it should also work to remove the barriers that are holding back the next generation of prospective homeowners from achieving what is core to all Americans: the opportunity for sustainable homeownership.
The Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, has taken a step in the right direction, recently concluding an RFI event on mortgage credit scoring standards to determine whether to use an updated FICO model (FICO 9), the VantageScore 3.0 model, or a combination of the two. One thing is for certain, however: one of the most effective ways to guarantee a rebound in American homeownership is to nurture credit scoring competition, a solution that is right at our fingertips.
Providing lenders with the option of deciding which brand to use (with practical constraints to avoid “score shopping”) would give credit scoring companies a reason to continue innovating while ensuring scores accurately reflect the ever-changing needs and demographics of America’s future homebuying population. This is especially critical because the Harvard Joint Center for Housing Studies has forecast that approximately 75 percent of new household formations in the period 2015-2035 will be undertaken by minorities, who are often disadvantaged by current scoring models.
Read the report by Phil Bracken at http://dsnews.com/daily-dose/06-04-2018/sustainable-homeownership