The Federal Housing Finance Agency (FHFA) has announced updates to the implementation of new credit score requirements for single-family loans acquired by Fannie Mae and Freddie Mac (the GSEs).
Following extensive stakeholder engagement and input, FHFA is aligning the implementation date of the bi-merge credit reporting requirement with the transition from the Classic FICO credit score model. This aligned transition is expected to occur in the fourth quarter of 2025.
History of the bi-merge
On October 24, 2022, FHFA announced the validation and approval of two new credit score models, FICO 10T and VantageScore 4.0, for use by the GSEs. Once implemented, lenders will be required to deliver both FICO 10T and VantageScore 4.0 credit scores, when available, with each single-family loan sold to the GSEs. On that same day, the FHFA also announced that the GSEs would transition from a tri-merge credit reporting requirement, in which credit reports are required from all three nationwide consumer reporting agencies, to a bi-merge requirement, in which credit reports are required from at least two of these agencies.
Over a year later, on March 23, 2023, the FHFA provided an update on the GSEs’ implementation plans and opportunities for stakeholder engagement. FHFA and the GSEs reiterated their commitment to working with stakeholders to ensure a smooth transition to the new credit scores and the new credit reporting requirements, in a manner that avoids unnecessary costs and complexity. Also that day, a proposed timeline was released that was designed to elicit stakeholder feedback on various elements of the implementation of both the new credit score models and the updated credit reporting requirements. The GSEs conducted extensive outreach to stakeholders in the form of targeted discussions with a variety of market participants and engagement in industry conferences and webinars, as well as through a stakeholder survey, which generated nearly one thousand responses.
On September 11, 2023, the FHFA announced the next phase of ongoing public engagement for the updated GSE credit score requirements. This engagement includes stakeholder forums and serves to identify a wide variety of issues, opportunities, and challenges related to successful implementation of the new requirements, including potential refinements to the timeline for adoption. Initial stakeholder forums were convened in Q4 of 2023 and addressed Uses of Historical Data for Stakeholder Analysis and Sequencing of Project Milestones.
Easing the transition
To better support market participants with this transition, the GSEs will accelerate the publication of VantageScore 4.0 historical data, originally expected to be published in Q1 of 2025, to early in Q3 of 2024. FHFA and the GSEs continue to work towards providing similar data to support the transition to the FICO 10T model, contingent upon achieving the necessary conditions for acquisition and publication of this data. FHFA will provide further details on implementation timing for FICO 10T once this process is complete.
In recent forums hosted by FHFA, stakeholders have emphasized the importance of this historical data to allow them to analyze the new models, as well as bi-merge credit reporting, and assess any changes they must make to their systems and models. Stakeholders have also shared perspectives on the efficiencies associated with aligning the option for bi-merge credit reporting with the transition from Classic FICO.
“Synchronizing bi-merge credit reporting with the implementation of the new credit score model requirements will reduce complexity for market participants, which is a key objective of our transition efforts,” said FHFA Director Sandra L. Thompson. “The release of historical data on tens of millions of Enterprise loan acquisitions affirms the commitment of FHFA and the Enterprises to a robust, transparent implementation process.”
FHFA and the GSEs will continue to provide regular updates to assist market participants throughout this transition.
