Regulation

WASHINGTON — Fannie Mae and Freddie Mac would be able to evaluate and use new credit scoring models under a bill introduced in the House that seeks to create more competition in the credit scoring industry.

The two government-sponsored enterprises have been using the FICO 4 credit score model since Fair Isaac Corp. introduced it in 2004. That has created a government-sanctioned monopoly, according to the sponsors of the bill.

“The GSEs’ use of a single credit score is an unfair practice that stifles competition and innovation in credit scoring,” said Rep. Ed Royce, R-Calif.

Royce is a senior member of the House Financial Services Committee and chairs the House Foreign Affairs Committee.

Rep. Terri Sewell, D-Ala., noted the FICO 4 is outdated and said it doesn’t “necessarily take into account something as simple as whether borrowers have paid their rent on time.”

VantageScore Solutions has […]

Mortgage lenders now have to get referrals from their real estate agents the old-fashioned way: earn them.

Lenders have long relied on formal contracts with agents, known as marketing services agreements, to get referral business. These agreements call for the parties to advertise together or provide other services to consumers.

But in 2015 the Consumer Financial Protection Bureau, while not outlawing the practice, put the industry on notice that it considers certain forms of MSAs to violate of the Real Estate Settlement Procedures Act ban on payments for a referral.

In response, several major lenders, including Wells Fargo, PHH Mortgage and Prospect Mortgage, said they were terminating their MSAs. With these arrangements on their way out, traditional word-of-mouth referrals are now the best and most cost-effective way of driving new business.

Some are suggesting that an end to MSAs will help level the playing field between […]