Contents
- (a) Authority for purchase and sale; residential mortgages; conventional mortgages; terms and conditions of sale or other disposition; lending activities20 changes
- (b) Authority of other institutions to enter into, perform, and carry out transactions2 changes
- (c) Prior approval of Secretary for new programs2 changes
- (d) Use of credit scores as condition for approval of residential mortgages1 change
(d)
(1)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)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)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 4548(1) of this title; and
(E)satisfies any other requirements, as determined by the Corporation.
(4)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)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)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)
(A)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)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)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)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)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 4548(1) of this title.
(9)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.
United States Government work; public domain under 17 U.S.C. § 105.