Credit Score Competition Act of 2015

Summary: Credit Score Competition Act of 2015 This bill amends the Federal National Mortgage Association Charter Act to authorize the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (government sponsored enterprises, or GSEs) to use credit scores in purchasing residential mortgages only under certain conditions, including that the GSE has established and made publicly available a description of the process it will use to validate and approve credit scoring models. The Director of the Federal Housing Finance Agency may, by regulation, establish standards and criteria for any process used by a GSE to validate and approve credit scoring models pursuant to the Acts.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Credit Score Competition Act of 
2015''.

SEC. 2. CREDIT SCORE VALIDATION; VALIDATION PROCESS.

    (a) Use of Credit Scores by Fannie Mae in Purchasing Residential 
Mortgages.--Subsection (b) of section 302 of the Federal National 
Mortgage Association Charter Act (12 U.S.C. 1717(b)) is amended by 
adding at the end the following new paragraph:
    ``(7)(A) Use of Credit Scores.--The corporation may condition its 
purchase of a residential mortgage under this section 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;
            ``(ii) the corporation has established and made publicly 
        available a description of the process the corporation will use 
        to validate and approve credit scoring models, which process 
        shall comply with any standards and criteria established by the 
        Director of the Federal Housing Finance Agency pursuant to 
        section 1328 of the Federal Housing Enterprises Financial 
        Safety and Soundness Act of 1992; and
            ``(iii) the corporation provides for the use of such credit 
        score by all of its automated underwriting systems and any 
        other procedures and systems used to purchase residential 
        mortgages.
    ``(B) Validation and Approval Process.--The process described in 
subparagraph (A)(ii) shall include an evaluation of--
            ``(i) the criteria used to validate and approve a credit 
        scoring model, including measures of the integrity, 
        reliability, and accuracy of such model, and an assurance that 
        such model is consistent with the safe and sound operation of 
        the corporation; and
            ``(ii) the data necessary for the validation of the credit 
        scoring model.
    ``(C) Application.--If the corporation elects to use a credit score 
under this paragraph, the corporation shall solicit applications from 
developers of credit scoring models for the validation and approval of 
such models under the process described in subparagraph (A)(ii).
    ``(D) Timeframe for Determination; Notice.--
            ``(i) In general.--The corporation shall establish a date 
        before which the corporation shall make a determination with 
        respect to any application submitted under subparagraph (C) and 
        provide notice of such determination to the applicant. Such 
        date shall not be 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 up to 2 extensions of the date 
        established under clause (i), each of which shall not exceed 30 
        days, upon the 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 (C) not later than 60 days after 
        the date on which the application was submitted to the 
        corporation.
            ``(iv) Reasons for disapproval.--If an application 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.
    ``(E) Authority of Director.--If the corporation elects to use a 
credit score under this paragraph, the Director of the Federal Housing 
Finance Agency shall require the corporation to routinely update the 
validation and approval process described in subparagraph (A)(ii) as 
the Director, in the Director's discretion, deems to be necessary to 
ensure such process remains appropriate and adequate and complies with 
any standards and criteria established pursuant to section 1328 of the 
Federal Housing Enterprises Financial Safety and Soundness Act of 1992.
    ``(F) Credit Score Defined.--In this paragraph, the term `credit 
score' means a numerical value or a categorization 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.''.
    (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 new 
subsection:
    ``(d)(1) Use of Credit Scores.--The Corporation may condition its 
purchase of a residential mortgage 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;
            ``(B) the Corporation has established and made publicly 
        available a description of the process the corporation will use 
        to validate and approve credit scoring models that, which 
        process shall comply with any standards and criteria 
        established by the Director of the Federal Housing Finance 
        Agency pursuant to section 1328 of the Federal Housing 
        Enterprises Financial Safety and Soundness Act of 1992; and
            ``(C) the Corporation provides for use of such credit score 
        by all of its automated underwriting systems and any other 
        procedures and systems used to purchase residential mortgages.
    ``(2) Validation and Approval Process.--The process described in 
paragraph (1)(B) shall include an evaluation of--
            ``(A) the criteria used to validate and approve a credit 
        scoring model, including measures of the integrity, 
        reliability, and accuracy of such model and an assurance that 
        such model is consistent with the safe and sound operation of 
        the Corporation; and
            ``(B) the data necessary for the validation of the credit 
        scoring model.
    ``(3) Application.--If the Corporation elects to use a credit score 
under this subsection, the Corporation shall solicit applications from 
developers of credit scoring models for the validation and approval of 
such models under the process described in paragraph (1)(B).
    ``(4) Timeframe for Determination; Notice.--
            ``(A) In general.--The Corporation shall establish a date 
        before which the Corporation shall make a determination with 
        respect to any application submitted under paragraph (3) and 
        provide notice of such determination to the applicant. Such 
        date shall not be 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 up to 2 extensions of the date 
        established under subparagraph (A), each of which shall not 
        exceed 30 days, upon the 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 (3) not later than 60 days after the 
        date on which the application was submitted to the corporation.
            ``(D) Reasons for disapproval.--If an application 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.
    ``(5) 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 routinely update the 
validation and approval process described in paragraph (1)(B) as the 
Director, in the Director's discretion, deems to be necessary to ensure 
such process remains appropriate and adequate and complies with any 
standards and criteria established pursuant to section 1328 of the 
Federal Housing Enterprises Financial Safety and Soundness Act of 1992.
    ``(6) Credit Score Defined.--In this subsection, the term `credit 
score' means a numerical value or a categorization 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.''.

SEC. 3. AUTHORITY OF DIRECTOR OF THE FEDERAL HOUSING FINANCE AGENCY.

    Subpart A of part 2 of subtitle A of the (12 U.S.C. 4541 et seq.) 
is amended by adding at the end the following new section:

``SEC. 1328. REGULATIONS FOR USE OF CREDIT SCORES.

    ``The Director may, 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 and section 305(d) of the Federal Home 
Loan Mortgage Corporation Act.''.

SEC. 4. EFFECTIVE DATE.

    The amendments made by this Act shall take effect 180 days after 
the date of enactment of this Act.