Title: Credit Score Competition Act of 2017
Policy area: Housing and Community Development

Summary:
Credit Score Competition Act of 2017
This bill amends the Federal National Mortgage Association Charter Act and the Federal Home Loan Mortgage Corporation Act to allow the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), when determining whether to purchase a residential mortgage, to consider a borrower's credit score only if certain procedural requirements are met with respect to the validation and approval of credit-scoring models.
The Federal Housing Finance Agency may, by regulation, establish standards and criteria for processes used by Fannie Mae and Freddie Mac to validate and approve credit-scoring models in accordance with the bill.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 1685 Introduced in Senate (IS)]

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115th CONGRESS
  1st Session
                                S. 1685

   To require Fannie Mae and Freddie Mac to establish procedures for 
considering certain credit scores in making a determination whether to 
        purchase a residential mortgage, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             August 1, 2017

 Mr. Scott (for himself and Mr. Warner) introduced the following bill; 
which was read twice and referred to the Committee on Banking, Housing, 
                           and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
   To require Fannie Mae and Freddie Mac to establish procedures for 
considering certain credit scores in making a determination whether to 
        purchase a residential mortgage, and for other purposes.

    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 ``Credit Score Competition Act of 
2017''.

SEC. 2. CREDIT SCORE VALIDATION; VALIDATION PROCESS.

    (a) Use of Credit Scores by Fannie Mae in Purchasing Residential 
Mortgages.--Section 302(b) of the Federal National Mortgage Association 
Charter Act (12 U.S.C. 1717(b)) is amended by adding at the end the 
following:
    ``(7)(A) Definition.--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.--The corporation may condition purchase 
of a residential mortgage by the corporation under this subsection 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 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.
    ``(C) Validation and Approval Process.--The process described in 
subparagraph (B)(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 that model, and an assurance that 
        the 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.
    ``(D) 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 
those models under the process described in subparagraph (B)(ii).
    ``(E) Timeframe for Determination; Notice.--
            ``(i) In general.--The corporation shall make a 
        determination with respect to any application submitted under 
        subparagraph (D), 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.
            ``(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 a 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 (D) not later than 60 days after 
        the date on which the application was submitted to the 
        corporation.
            ``(iv) Reasons for disapproval.--If an application 
        submitted under subparagraph (D) 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.
    ``(F) 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 (B)(ii) as 
the Director determines necessary to ensure that the process remains 
appropriate, 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.''.
    (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:
    ``(d)(1) Definition.--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.
    ``(2) Use of Credit Scores.--The Corporation may 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;
            ``(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, which 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 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.
    ``(3) Validation and Approval Process.--The process described in 
paragraph (2)(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 that model and an assurance that 
        the 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.
    ``(4) 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 
those models under the process described in paragraph (2)(B).
    ``(5) Timeframe for Determination; Notice.--
            ``(A) In general.--The Corporation shall make a 
        determination with respect to any application submitted under 
        paragraph (4), 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) 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 (4) not later than 60 days after the 
        date on which the application was submitted to the Corporation.
            ``(D) Reasons for disapproval.--If an application submitted 
        under paragraph (4) 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.
    ``(6) 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 (2)(B) as the 
Director determines necessary to ensure that the process remains 
appropriate, 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.''.

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

    Subpart A of part 2 of subtitle A of the Federal Housing 
Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4541 
et seq.) is amended by adding at the end the following:

``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 on the date that 
is 180 days after the date of enactment of this Act.
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