Fannie Mae, Freddie Mac stick with outdated credit scoring model

If you’ve been waiting for the long-anticipated news that the two dominant players in the home mortgage arena — Fannie Mae and Freddie Mac — finally have decided to overhaul their outdated credit scoring systems to expand homeownership opportunities for a broader range of consumers, sorry. Your wait just got a lot longer.

There will be no modernization of the mortgage giants’ controversial scoring systems before mid-2019 at the earliest, according to Fannie and Freddie’s top government regulator.

Melvin Watt, director of the Federal Housing Finance Agency, disclosed last week that despite intense pressure from Congress and homeownership advocacy groups, he plans no changes in the next two years. This means retention of the existing system that uses FICO scoring models that are widely considered out of date, and a continued requirement that mortgage lenders underwrite homebuyer applicants exclusively using scoring versions that even their developer, FICO, would prefer to replace.

Some quick background: FICO scores, which range from 300 to 850, predict the relative risk of default on loan applications, based on information from consumers’ credit files. Low scores indicate greater risk; high scores less risk.

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