Alternative Data for Additional Credit FHA Pilot Program Reauthorization Act

I 117TH CONGRESS 1ST SESSION H. R. 123 To authorize a pilot program under section 258 of the National Housing Act to establish an automated process for providing additional credit rating information for mortgagors and prospective mortgagors under certain mortgages. IN THE HOUSE OF REPRESENTATIVES JANUARY 4, 2021 Mr. GREEN of Texas introduced the following bill; which was referred to the Committee on Financial Services A BILL To authorize a pilot program under section 258 of the Na- tional Housing Act to establish an automated process for providing additional credit rating information for mortgagors and prospective mortgagors under certain mortgages. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Alternative Data for 4 Additional Credit FHA Pilot Program Reauthorization 5 Act’’. 6 VerDate Sep 11 2014 22:38 Jan 27, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H123.IH H123 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 123 IH SEC. 2. PILOT PROGRAM FOR BORROWERS WITHOUT SUF- 1 FICIENT CREDIT HISTORY. 2 Section 258 of the National Housing Act (12 U.S.C. 3 1715z–24) is amended— 4 (1) in subsection (a)— 5 (A) by striking ‘‘carry out’’ and inserting 6 ‘‘establish and carry out’’; 7 (B) by striking ‘‘establish, and’’; 8 (C) by inserting ‘‘who elect to participate 9 in the pilot program’’ before the second comma; 10 (D) by striking ‘‘mortgagors and’’; 11 (E) by inserting after ‘‘their creditworthi- 12 ness’’ the following: ‘‘and have opted into the 13 use of additional credit information’’; and 14 (F) by striking ‘‘alternative’’ each place 15 such term appears and inserting ‘‘additional’’; 16 (2) in subsection (b), by adding after the period 17 at the end the following: ‘‘The pilot program may 18 not be carried out with respect to any mortgagor or 19 prospective mortgagor under a mortgage the pro- 20 ceeds of which are used to prepay or pay off an ex- 21 isting loan secured by the same property.’’; 22 (3) by striking subsection (c); 23 (4) by redesignating subsections (b) (as amend- 24 ed by paragraph (2) of this subsection) and (d) as 25 subsections (c) and (k), respectively; 26 VerDate Sep 11 2014 22:38 Jan 27, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H123.IH H123 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 123 IH (5) by inserting after subsection (a) the fol- 1 lowing new subsection: 2 ‘‘(b) GOAL.—The goal of the pilot program under 3 this section shall be to examine and evaluate the benefits 4 of using such a credit scoring model that uses additional 5 data.’’; 6 (6) by inserting after subsection (c) (as so re- 7 designated by paragraph (4) of this subsection) the 8 following: 9 ‘‘(d) ADDITIONAL CREDIT INFORMATION.—The Sec- 10 retary shall, after consultation with the Government Na- 11 tional Mortgage Association and not later than one year 12 after the date of the enactment of this subsection, select 13 one or more commercially available credit scoring models 14 that will be available under the pilot and that utilize addi- 15 tional data, as the Secretary considers appropriate based 16 on the goals of the pilot program. In selecting the model 17 or models to use, the Secretary shall consider the criteria 18 under part 1254 of the regulations of the Director of the 19 Federal Housing Finance Agency (12 C.F.R. Part 1254) 20 to the extent appropriate. 21 ‘‘(e) NOTIFICATION.— 22 ‘‘(1) NOTICE OF OPTIONS.—The Secretary shall 23 develop a notice for prospective mortgagors, and re- 24 quire mortgagees to provide such notice to prospec- 25 VerDate Sep 11 2014 22:38 Jan 27, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H123.IH H123 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 123 IH tive mortgagors, that informs prospective mortga- 1 gors of— 2 ‘‘(A) the ability to opt into the use of the 3 credit scoring model selected for use under the 4 pilot program; 5 ‘‘(B) information on how the pilot program 6 credit scoring model differs from the FHA’s 7 current credit scoring models, including the 8 types of additional data that are included in the 9 pilot program model; and 10 ‘‘(C) housing counseling agencies in the 11 area that are approved by the Department of 12 Housing and Urban Development. 13 ‘‘(2) COMPARISON OF LENDING OPTIONS.—The 14 Secretary shall require mortgagees participating in 15 the pilot program to provide information to prospec- 16 tive mortgagors sufficient to allow comparison of the 17 mortgagor’s lending options using the credit scoring 18 model under the pilot program and using the credit 19 scoring model then in effect for mortgagors not opt- 20 ing into the use of the credit scoring model under 21 the pilot program. 22 ‘‘(f) UNDERWRITING OPTIONS.—This section may 23 not be construed to preclude a prospective mortgagor who 24 opts to use an approved credit scoring model under the 25 VerDate Sep 11 2014 22:38 Jan 27, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H123.IH H123 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 123 IH pilot program under this subsection in connection with un- 1 derwriting for a mortgage insured under this title from 2 thereafter obtaining a determination of creditworthiness 3 involved in underwriting for such mortgage using informa- 4 tion other than that provided under such approved credit 5 scoring model. 6 ‘‘(g) PROTECTION OF PROPRIETARY INFORMA- 7 TION.—This section may not be construed to require the 8 disclosure or sharing of any proprietary information. 9 ‘‘(h) REPORTING.— 10 ‘‘(1) IN GENERAL.—The Secretary shall submit 11 reports to the Congress in accordance with para- 12 graph (2) that provide a detailed evaluation of the 13 effectiveness of the pilot, including data that 14 shows— 15 ‘‘(A) the number of mortgagors who had 16 the option to opt into using additional credit in- 17 formation and the number of mortgagors who 18 opted into using additional credit information; 19 ‘‘(B) the total number and percent of 20 mortgagors who opted into the pilot and were 21 subsequently approved for a mortgage; 22 ‘‘(C) demographic information about mort- 23 gagors who opt into using additional credit in- 24 formation, compared to demographic informa- 25 VerDate Sep 11 2014 22:38 Jan 27, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H123.IH H123 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 123 IH tion about mortgagors generally, which shall in- 1 clude race, ethnicity, marital status, sex or gen- 2 der, geographic location regarding mortgaged 3 properties, and any other information the Sec- 4 retary deems appropriate; 5 ‘‘(D) whether or not mortgagors with no or 6 thin credit files benefitted from having this op- 7 tion and how; 8 ‘‘(E) whether or not other borrowers who 9 did not have thin or no credit files benefitted 10 from this option and how; 11 ‘‘(F) the effectiveness of the additional 12 credit information in predicting mortgage loan 13 default; 14 ‘‘(G) the rate of participation of mortga- 15 gees in the pilot program; 16 ‘‘(H) whether or not the pilot program had 17 an impact on the Mutual Mortgage Insurance 18 Fund, in general, and specifically whether it 19 had an impact on the economic net worth ratio 20 of the Fund; 21 ‘‘(I) whether or not there was sufficient in- 22 come from the pilot program to offset the risk 23 posed to such Fund by the pilot program; 24 VerDate Sep 11 2014 22:38 Jan 27, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H123.IH H123 pamtmann on DSKBC07HB2PROD with BILLS 7 •HR 123 IH ‘‘(J) whether the pilot program had an im- 1 pact on the ability of other borrowers not par- 2 ticipating in the program to obtain the products 3 and services of the FHA; and 4 ‘‘(K) any other information the Secretary 5 determines relevant. 6 ‘‘(2) SUBMISSION.—The Secretary shall submit 7 a report described in paragraph (1)— 8 ‘‘(A) not later than 6 months after the 9 conclusion of the 2-year period beginning on the 10 date on which the Secretary begins accepting 11 the additional credit scores through the pilot 12 program established by the Secretary pursuant 13 to this section; and 14 ‘‘(B) not later than 1 year after the con- 15 clusion of the 5-year period beginning on the 16 date of the enactment of the Alternative Data 17 for Additional Credit FHA Pilot Program Re- 18 authorization Act. 19 ‘‘(3) REPORT ON SELECTION OF ADDITIONAL 20 CREDIT MODEL.—Not later than the conclusion of 21 the 6-month period that begins upon the conclusion 22 of the 1-year period under subsection (d), the Sec- 23 retary shall submit to the Congress a report explain- 24 ing why the additional credit scoring model or mod- 25 VerDate Sep 11 2014 22:38 Jan 27, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H123.IH H123 pamtmann on DSKBC07HB2PROD with BILLS 8 •HR 123 IH els selected pursuant to subsection (d) were selected 1 in lieu of other commercially available credit scoring 2 models. 3 ‘‘(4) PUBLIC AVAILABILITY OF INFORMATION.— 4 The Secretary shall make publicly available in an 5 easily accessible location on the website of the De- 6 partment— 7 ‘‘(A) each report submitted to the Con- 8 gress pursuant to this subsection; and 9 ‘‘(B) information about the pilot program, 10 which shall include an up-to-date listing of 11 mortgagees participating in the pilot program. 12 ‘‘(i) AUTHORITY TO LIMIT PARTICIPATION.—The 13 Secretary may establish a limitation to cap participation 14 in the pilot program under this section. 15 ‘‘(j) AUTHORIZATION OF APPROPRIATIONS.—There 16 is authorized to be appropriated— 17 ‘‘(1) $3,000,000 for fiscal year 2020 for estab- 18 lishing and carrying out the pilot program under 19 this section; and 20 ‘‘(2) $1,500,000 for each of fiscal years 2021 21 through 2024 for carrying out the pilot program 22 under this section.’’; and 23 (7) in subsection (k), as so redesignated by 24 paragraph (4), by striking ‘‘5-year period beginning 25 VerDate Sep 11 2014 22:38 Jan 27, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H123.IH H123 pamtmann on DSKBC07HB2PROD with BILLS 9 •HR 123 IH on the date of the enactment of the Building Amer- 1 ican Homeownership Act of 2008’’ and inserting ‘‘5- 2 year period beginning on the date of the enactment 3 of the Alternative Data for Additional Credit FHA 4 Pilot Program Reauthorization Act’’. 5 Æ VerDate Sep 11 2014 22:38 Jan 27, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6301 E:\BILLS\H123.IH H123 pamtmann on DSKBC07HB2PROD with BILLS