Many say that 2016, might be a good year to buy a home. This good news extends to those who have been discouraged by the credit-scoring system from getting a home mortgage.
According to The Washington Post, changes to the credit scoring system is underway. Moreover it was reported that Federal Regulators and Congress are pushing for a more updated credit-scoring representations that include other forms of credit such as rent, utilities and cellphone payments as additions to buyers' standard credit files.
In mid-December, big mortgage investors, Fannie Mae and Freddie Mac, have been mandated by the controlling federal agency to summarize their procedures for accepting the updated credit-scoring representations and proceed with executing the changes this 2016. In the same month, legislation introduced "Credit Score Competition Act" with bipartisan support in the house, according to The Washington Post. The goal of this act is to extend mortgage money to more creditworthy loan applicants, who are currently excluded from consideration with the current credit-scoring system.
"Fannie Mae and Freddie Mac are the largest mortgage purchasers in the nation, but they rely on credit-score models that don't necessarily take into account something as simple as whether borrowers have paid their rent on time. Homeownership is an integral part of the American Dream that shouldn't be out of reach for low-income, rural and minority borrowers who lack access to traditional forms of credit." TWP quotes Rep. Terri A. Sewell (Ala.), co-sponsor of the bill with Rep. Edward R. Royce (Calif.).
Royce reported said that the new bill would put an end to unfair practices that discourages competition and revolution in credit scoring which is a result of "credit-score monopoly at Fannie and Freddie."
According to The Washington Post, both Fannie Mae and Freddie Mac rely on credit-scoring tools from FICO. Fico had introduced FICO Score 9 in summer 2014, which gives better treatment to a large number of consumers, but the two big players have yet to adopt to this.
