HR 123 — Alternative Data for Additional Credit FHA Pilot Program Reauthorization Act

123 IntroducedReported in House (IH)](RH)] <DOC> 116thUnion CONGRESSCalendar 1stNo. Session H.

547 116th CONGRESS 2d Session H.

123 To[Report authorizeNo. 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.

116-663] 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.

which was referred to the Committee on Financial Services _______________________________________________________________________December A17, BILL2020 ToAdditional authorizesponsors: 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.

Mr.

Sherman and Mr.

Cleaver December 17, 2020 Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed [Strike out all after the enacting clause and insert the part printed in italic] [For text of introduced bill, see copy of bill as introduced on January 3, 2019] _______________________________________________________________________ A BILL 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.

This Act may be cited as the ``FHA``Alternative Data for Additional Credit FHA Pilot Program Reauthorization Act''.

AUTHORIZATIONPILOT OFPROGRAM PILOTFOR PROGRAM.BORROWERS WITHOUT SUFFICIENT CREDIT HISTORY.

(a)Section Establishment.--The Secretary of Housing and Urban Development shall establish and carry out the pilot program under section 258 of the National Housing Act (12 U.S.C.

1715z-24),1715z-24) asis amendedamended-- by(1) in subsection (b)(a)-- of(A) thisby section.striking ``carry out'' and inserting ``establish and carry out'';

(b)(B) Sunset.--Subsectionby (d)striking of``establish, sectionand''; 258 of the National Housing Act (12 U.S.C.

1715z-24(d))(C) is amended by strikinginserting ``5-year``who periodelect beginningto onparticipate thein date of the enactmentpilot ofprogram'' thebefore Building American Homeownership Act of 2008'' and inserting ``14-year period beginning on the datesecond ofcomma; the enactment of the FHA Additional Credit Pilot Program Reauthorization Act''.

<all>(D) by striking ``mortgagors and'';

(E) by inserting after ``their creditworthiness'' the following:

``and have opted into the use of additional credit information'';

and (F) by striking ``alternative'' each place such term appears and inserting ``additional'';

(2) in subsection (b), by adding after the period at the end the following:

``The pilot program may not be carried out with respect to any mortgagor or prospective mortgagor under a mortgage the proceeds of which are used to prepay or pay off an existing loan secured by the same property.'';

(3) by striking subsection (c);

(4) by redesignating subsections (b) (as amended by paragraph (2) of this subsection) and (d) as subsections (c) and (k), respectively;

(5) by inserting after subsection (a) the following new subsection:

``(b) Goal.--The goal of the pilot program under this section shall be to examine and evaluate the benefits of using such a credit scoring model that uses additional data.'';

(6) by inserting after subsection (c) (as so redesignated by paragraph (4) of this subsection) the following:

``(d) Additional Credit Information.--The Secretary shall, after consultation with the Government National Mortgage Association and not later than one year after the date of the enactment of this subsection, select one or more commercially available credit scoring models that will be available under the pilot and that utilize additional data, as the Secretary considers appropriate based on the goals of the pilot program.

In selecting the model or models to use, the Secretary shall consider the criteria under part 1254 of the regulations of the Director of the Federal Housing Finance Agency (12 C.F.R.

Part 1254) to the extent appropriate.

``(e) Notification.-- ``(1) Notice of options.--The Secretary shall develop a notice for prospective mortgagors, and require mortgagees to provide such notice to prospective mortgagors, that informs prospective mortgagors of-- ``(A) the ability to opt into the use of the credit scoring model selected for use under the pilot program;

``(B) information on how the pilot program credit scoring model differs from the FHA's current credit scoring models, including the types of additional data that are included in the pilot program model;

and ``(C) housing counseling agencies in the area that are approved by the Department of Housing and Urban Development.

``(2) Comparison of lending options.--The Secretary shall require mortgagees participating in the pilot program to provide information to prospective mortgagors sufficient to allow comparison of the mortgagor's lending options using the credit scoring model under the pilot program and using the credit scoring model then in effect for mortgagors not opting into the use of the credit scoring model under the pilot program.

``(f) Underwriting Options.--This section may not be construed to preclude a prospective mortgagor who opts to use an approved credit scoring model under the pilot program under this subsection in connection with underwriting for a mortgage insured under this title from thereafter obtaining a determination of creditworthiness involved in underwriting for such mortgage using information other than that provided under such approved credit scoring model.

``(g) Protection of Proprietary Information.--This section may not be construed to require the disclosure or sharing of any proprietary information.

``(h) Reporting.-- ``(1) In general.--The Secretary shall submit reports to the Congress in accordance with paragraph (2) that provide a detailed evaluation of the effectiveness of the pilot, including data that shows-- ``(A) the number of mortgagors who had the option to opt into using additional credit information and the number of mortgagors who opted into using additional credit information;

``(B) the total number and percent of mortgagors who opted into the pilot and were subsequently approved for a mortgage;

``(C) demographic information about mortgagors who opt into using additional credit information, compared to demographic information about mortgagors generally, which shall include race, ethnicity, marital status, sex or gender, geographic location regarding mortgaged properties, and any other information the Secretary deems appropriate;

``(D) whether or not mortgagors with no or thin credit files benefitted from having this option and how;

``(E) whether or not other borrowers who did not have thin or no credit files benefitted from this option and how;

``(F) the effectiveness of the additional credit information in predicting mortgage loan default;