Credit Score “Phishing” – FNMA and FMAC Lay Down the Law
A new catch-phrase has been created in the mortgage industry “Credit Score Phishing.” This is used to describe a process whereby a mortgage broker or lender, through their Credit Reporting Agency (CRA) reviews all available FICO score models, and then selects the highest of those scores for use on mortgage loan applications.
Both GSEs (Fannie Mae and Freddie Mac) have created policies stipulating the accepted FICO score models and have recently issued multiple memos to those submitting loans to FNMA and FMAC. These notices reiterate the requirement that only approved FICO score models be used. Similar warnings were sent to all participating CRAs. At present, the only credit scoring models approved by both GSEs are,
•Equifax Beacon 5.0
•TransUnion FICO Risk Score, Classic 04
•Experian/Fair Isaac Risk Model V2
It should be noted that while GSE underwriting systems (FNMA Desktop Underwriter and FMAC Loan Prospector) do not currently have the ability to detect/reject a loan based on the credit score model submitted, both have warned against the use of any non-approved score models.
Despite these warnings, some CRAs are still providing brokers and lenders credit reports containing prohibited scoring models, in violation of GSE policies. Those submitting tri merge credit reports containing unapproved scoring models run the risk of penalties and sanctions by the GSEs that could include loan buy back, rejection of future loans and/or refusal to accept credit reports from credit reporting agencies found in violation of GSE policies.
More information on FNMA / FMAC credit score requirements are available at,
https://www.efanniemae.com/sf/technology/ou/du/pdf/ducreditscoremodel.pdf
http://www.loanprospector.com/about/crc.html
