Alternative Data for Additional Credit FHA Pilot Program Reauthorization Act
Bill: H.R.123 | Sponsor: Rep. Green, Al (D-TX)
Policy area: Finance and Financial Sector

Summary:
Alternative Data for Additional Credit FHA Pilot Program Reauthorization Act
This bill establishes a pilot program for an additional credit rating system for use by mortgage lenders. Specifically, the program utilizes one or more commercially available credit scoring models that apply additional credit information about borrowers who have insufficient credit histories for purposes of determining their creditworthiness for mortgages insured by the Federal Housing Administration.

To authorize a pilot program under section 258 of the National Housing 
 Act to establish an automated process for providing additional credit 
  rating information for mortgagors and prospective mortgagors under 
                           certain mortgages.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Alternative Data for Additional 
Credit FHA Pilot Program Reauthorization Act''.

SEC. 2. PILOT PROGRAM FOR BORROWERS WITHOUT SUFFICIENT CREDIT HISTORY.

    Section 258 of the National Housing Act (12 U.S.C. 1715z-24) is 
amended--
            (1) in subsection (a)--
                    (A) by striking ``carry out'' and inserting 
                ``establish and carry out'';
                    (B) by striking ``establish, and'';
                    (C) by inserting ``who elect to participate in the 
                pilot program'' before the second comma;
                    (D) by striking ``mortgagors and'';
                    (E) by inserting after ``their creditworthiness'' 
                the following: ``and have opted into the use of 
                additional credit information''; and
                    (F) by striking ``alternative'' each place such 
                term appears and inserting ``additional'';
            (2) in subsection (b), by adding after the period at the 
        end the following: ``The pilot program may not be carried out 
        with respect to any mortgagor or prospective mortgagor under a 
        mortgage the proceeds of which are used to prepay or pay off an 
        existing loan secured by the same property.'';
            (3) by striking subsection (c);
            (4) by redesignating subsections (b) (as amended by 
        paragraph (2) of this subsection) and (d) as subsections (c) 
        and (k), respectively;
            (5) by inserting after subsection (a) the following new 
        subsection:
    ``(b) Goal.--The goal of the pilot program under this section shall 
be to examine and evaluate the benefits of using such a credit scoring 
model that uses additional data.'';
            (6) by inserting after subsection (c) (as so redesignated 
        by paragraph (4) of this subsection) the following:
    ``(d) Additional Credit Information.--The Secretary shall, after 
consultation with the Government National Mortgage Association and not 
later than one year after the date of the enactment of this subsection, 
select one or more commercially available credit scoring models that 
will be available under the pilot and that utilize additional data, as 
the Secretary considers appropriate based on the goals of the pilot 
program. In selecting the model or models to use, the Secretary shall 
consider the criteria under part 1254 of the regulations of the 
Director of the Federal Housing Finance Agency (12 C.F.R. Part 1254) to 
the extent appropriate.
    ``(e) Notification.--
            ``(1) Notice of options.--The Secretary shall develop a 
        notice for prospective mortgagors, and require mortgagees to 
        provide such notice to prospective mortgagors, that informs 
        prospective mortgagors of--
                    ``(A) the ability to opt into the use of the credit 
                scoring model selected for use under the pilot program;
                    ``(B) information on how the pilot program credit 
                scoring model differs from the FHA's current credit 
                scoring models, including the types of additional data 
                that are included in the pilot program model; and
                    ``(C) housing counseling agencies in the area that 
                are approved by the Department of Housing and Urban 
                Development.
            ``(2) Comparison of lending options.--The Secretary shall 
        require mortgagees participating in the pilot program to 
        provide information to prospective mortgagors sufficient to 
        allow comparison of the mortgagor's lending options using the 
        credit scoring model under the pilot program and using the 
        credit scoring model then in effect for mortgagors not opting 
        into the use of the credit scoring model under the pilot 
        program.
    ``(f) Underwriting Options.--This section may not be construed to 
preclude a prospective mortgagor who opts to use an approved credit 
scoring model under the pilot program under this subsection in 
connection with underwriting for a mortgage insured under this title 
from thereafter obtaining a determination of creditworthiness involved 
in underwriting for such mortgage using information other than that 
provided under such approved credit scoring model.
    ``(g) Protection of Proprietary Information.--This section may not 
be construed to require the disclosure or sharing of any proprietary 
information.
    ``(h) Reporting.--
            ``(1) In general.--The Secretary shall submit reports to 
        the Congress in accordance with paragraph (2) that provide a 
        detailed evaluation of the effectiveness of the pilot, 
        including data that shows--
                    ``(A) the number of mortgagors who had the option 
                to opt into using additional credit information and the 
                number of mortgagors who opted into using additional 
                credit information;
                    ``(B) the total number and percent of mortgagors 
                who opted into the pilot and were subsequently approved 
                for a mortgage;
                    ``(C) demographic information about mortgagors who 
                opt into using additional credit information, compared 
                to demographic information about mortgagors generally, 
                which shall include race, ethnicity, marital status, 
                sex or gender, geographic location regarding mortgaged 
                properties, and any other information the Secretary 
                deems appropriate;
                    ``(D) whether or not mortgagors with no or thin 
                credit files benefitted from having this option and 
                how;
                    ``(E) whether or not other borrowers who did not 
                have thin or no credit files benefitted from this 
                option and how;
                    ``(F) the effectiveness of the additional credit 
                information in predicting mortgage loan default;
                    ``(G) the rate of participation of mortgagees in 
                the pilot program;
                    ``(H) whether or not the pilot program had an 
                impact on the Mutual Mortgage Insurance Fund, in 
                general, and specifically whether it had an impact on 
                the economic net worth ratio of the Fund;
                    ``(I) whether or not there was sufficient income 
                from the pilot program to offset the risk posed to such 
                Fund by the pilot program;
                    ``(J) whether the pilot program had an impact on 
                the ability of other borrowers not participating in the 
                program to obtain the products and services of the FHA; 
                and
                    ``(K) any other information the Secretary 
                determines relevant.
            ``(2) Submission.--The Secretary shall submit a report 
        described in paragraph (1)--
                    ``(A) not later than 6 months after the conclusion 
                of the 2-year period beginning on the date on which the 
                Secretary begins accepting the additional credit scores 
                through the pilot program established by the Secretary 
                pursuant to this section; and
                    ``(B) not later than 1 year after the conclusion of 
                the 5-year period beginning on the date of the 
                enactment of the Alternative Data for Additional Credit 
                FHA Pilot Program Reauthorization Act.
            ``(3) Report on selection of additional credit model.--Not 
        later than the conclusion of the 6-month period that begins 
        upon the conclusion of the 1-year period under subsection (d), 
        the Secretary shall submit to the Congress a report explaining 
        why the additional credit scoring model or models selected 
        pursuant to subsection (d) were selected in lieu of other 
        commercially available credit scoring models.
            ``(4) Public availability of information.--The Secretary 
        shall make publicly available in an easily accessible location 
        on the website of the Department--
                    ``(A) each report submitted to the Congress 
                pursuant to this subsection; and
                    ``(B) information about the pilot program, which 
                shall include an up-to-date listing of mortgagees 
                participating in the pilot program.
    ``(i) Authority To Limit Participation.--The Secretary may 
establish a limitation to cap participation in the pilot program under 
this section.
    ``(j) Authorization of Appropriations.--There is authorized to be 
appropriated--
            ``(1) $3,000,000 for fiscal year 2020 for establishing and 
        carrying out the pilot program under this section; and
            ``(2) $1,500,000 for each of fiscal years 2021 through 2024 
        for carrying out the pilot program under this section.''; and
            (7) in subsection (k), as so redesignated by paragraph (4), 
        by striking ``5-year period beginning on the date of the 
        enactment of the Building American Homeownership Act of 2008'' 
        and inserting ``5-year period beginning on the date of the 
        enactment of the Alternative Data for Additional Credit FHA 
        Pilot Program Reauthorization Act''.
                                 <all>