Washington, D.C. — The National Fair Housing Alliance® (“NFHA™”) applauds the Federal Housing Finance Agency (“FHFA”) for releasing three critically-important housing policy changes to expand access to credit. 

First, FHFA announced the validation and approval of both the FICO 10T credit score model and the VantageScore 4.0 credit score model for use by Fannie Mae and Freddie Mac (the “Enterprises”). 

“We applaud FHFA for choosing more inclusive credit score models.” said Lisa Rice, President and CEO of NFHA. “The new models replace an older model that did not consider information that is most analogous to paying a monthly mortgage. They allow for the use of expanded reliable data, like rental housing payment information, that may be contained in a consumer’s credit file. NFHA has fought for this victory for over a decade and we’re pleased that Director Thompson has taken this bold step to ensure the GSEs use credit scoring models that are safe, sound, and expand fair credit access to borrowers of color, persons with disabilities, single female headed households and other protected classes under fair lending laws.” 

Also, FHFA announced targeted changes to the Enterprises’ guarantee fee pricing by eliminating upfront fees — known as Loan Level Pricing Adjustments (“LLPAs”) — for certain low- and moderate-income borrowers and affordable mortgage products. LLPAs are based on credit score and loan-to-value ratio, which are highly correlated with race and ethnicity. Moreover, borrowers of color are disproportionately impacted by bias in our financial markets and that bias can be reflected in credit scoring systems. NFHA has repeatedly advocated for the repeal of LLPAs as they were first implemented by FHFA during the Great Recession and have restricted access to quality mortgage loans for qualified borrowers of color ever since then. 

“FHFA’s action today is an incredible first step in promoting equitable access to credit,” said Nikitra Bailey, NFHA’s Executive Vice President. LLPAs determine the pricing of mortgages and can add an additional 300 basis points or more to the cost of a loan. Without this change, consumers of color could be charged interest rates upwards of 9.5% in today’s rising interest rate environment, making it difficult to afford a loan. As many borrowers of color are outside of the low- and moderate-income range, we look forward to working with FHFA to explore further repealing the LLPA framework.”

Finally, FHFA for the first time provided public access to millions of Uniform Appraisal Dataset (UAD) aggregate statistics derived from more than 47.3 million appraisals. FHFA also released data tools that will enable users to analyze the differences between appraised home values in communities of color, over time, and across both state and metropolitan areas. 

“We commend Director Thompson for the momentous decision to share these data and tools with the public,” said Maureen Yap, Senior Counsel at NFHA. “This was one of the key recommendations from the NFHA Consortium report on appraisal bias. Like HMDA, this data can revolutionize our understanding of the appraisal process and help develop better compliance systems to prevent harm to consumers and communities of color.”  

“Today, families of color lag far behind wealthier and White communities that were advantaged by lending discrimination supported by government and private industry policies and actions that led to vast disparities in homeownership and wealth,” said Ms. Rice. “Ensuring a fair and equitable national housing finance market is consistent with FHFA’s obligation to Affirmatively Further Fair Housing and also makes good business sense. The demographics of the nation are undergoing a dramatic shift, and the majority of new households formed over the next decade will be households of color. In other words, future housing demand will be driven by people of color. What’s more, adopting new systems and policies that reduce discrimination is good for the greater society. Eliminating inequities against Black people alone would significantly increase the U.S. GDP and strengthen our economy. FHFA’s actions will promote a robust housing market, with access to mortgage credit on fair and equitable terms for all creditworthy borrowers.”

###

The National Fair Housing Alliance (NFHA) is the country’s only national civil rights organization dedicated solely to eliminating all forms of housing and lending discrimination and ensuring equal opportunities for all people. As the trade association for over 170 fair housing and justice-centered organizations and individuals throughout the U.S. and its territories, NFHA works to dismantle longstanding barriers to equity and build diverse, inclusive, well-resourced communities.