FHFA Publishes Final Rule On Validation And Approval Of Credit Score Models

On August 16, the Federal Housing Finance Agency ("FHFA") issued a final rule on validation and approval of third-party credit score models ("Final Rule") that Fannie Mae and Freddie Mac ("GSEs") use in deciding whether to purchase residential mortgage loans.[1] The FHFA is the GSEs' prudential regulator and, since 2008, has served as their conservator. In doing so, the FHFA satisfied its obligation to publish a framework for credit score model validation and approval required in section 310 of the Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 ("EGRRCPA").[2] Section 310 now requires each GSE to publish its description of its validation and approval process for evaluating applications from credit score model developers, consistent with the FHFA's framework.