As of now, Fannie Mae and Freddie Mac only consider the FICO credit scoring model when making mortgage purchase decisions. A recently introduced bill is trying to change this singular model and move toward a more multifaceted model. The Credit Score Competition Act of 2015 was introduced by Representatives Ed Royce and Terri Sewell to the House of Representatives.
Consumers looking to purchase a home with no FICO score or one under 620 are not eligible for a mortgage that can be sold to Fannie Mae or Freddie Mac, and lower-to-middle income Americans that qualify to purchase a home but cannot due to their a low, or nonexistent FICO score are finding themselves locked out the housing market. These two groups of consumers could greatly benefit from other credit-scoring models, Representatives Royce and Sewell said.
While many factors contribute to the overall health of the housing market and economy, home equity is providing a major boost to the overall position of U.S. households. A recent report from the Financial Accounts of U.S. and analysis from the National Association of Home Builders found that household holdings of real estate reached 21 point 826 trillion dollars in the third quarter of 2015, up 1 point 365 trillion dollars from 20 point 461 trillion dollars from last year.