H.R. 8318: Original Additional Credit FHA Pilot Program Authorization Act

The bill titled the "Original Additional Credit FHA Pilot Program Authorization Act" aims to establish a pilot program that will allow for the use of additional credit rating information for certain borrowers seeking mortgages, particularly those with insufficient credit history. Here are the key points of what this bill would do:

Establishment of the Pilot Program

The bill amends Section 258 of the National Housing Act to:

• Authorize the Secretary of Housing and Urban Development to establish and carry out a pilot program.
• Focus on borrowers who have opted to participate in this pilot program and are using additional credit information to assess their creditworthiness.
• Exclude borrowers using the mortgage proceeds to pay off existing loans secured by the same property.

Goals of the Program

The main goal of the pilot program is to evaluate the effectiveness and benefits of a credit scoring model that incorporates additional data beyond what is traditionally used.

Implementation of Additional Credit Information

The Secretary will select one or more commercially available credit scoring models that utilize additional data suitable for the pilot program. This selection will be made in consultation with the Government National Mortgage Association.

Notification Requirements

The bill mandates that the Secretary develop a notice for potential borrowers. This notice must inform them about:

• The option to opt into the pilot program's credit scoring model.
• How this model differs from current FHA credit scoring methods, including the additional data that is used.
• Approved housing counseling agencies available in the area.

Comparison of Lending Options

Mortgage lenders participating in the pilot program must provide information to allow borrowers to compare their mortgage options using the pilot program's credit scoring model against the traditional models.

Underwriting Flexibility

Borrowers who opt for the pilot program credit scoring model will still have the option to obtain loan underwriting assessments using other information, not restricted to the new credit scoring model.

Reporting Requirements

The Secretary is required to submit detailed reports to Congress evaluating the pilot program's effectiveness, which will include data on:

• The number of borrowers opting to use additional credit information.
• The approval rates of those participants for mortgages.
• Demographic comparisons of participating borrowers.
• Outcomes for borrowers with limited or no credit histories.
• The performance of mortgages under the new credit scoring model in predicting defaults.

Funding and Authorization

The bill authorizes funding of:

• $3,000,000 for fiscal year 2023 to establish the program.
• $1,500,000 for each of the subsequent fiscal years through 2027 for program implementation.

Limitation of Participation

The Secretary may also set limitations on the number of participants in the pilot program.

Public Disclosure

All reports and information related to the pilot program must be publicly available on the Department of Housing and Urban Development's website.

Relevant Companies

• PMT - PennyMac Mortgage Investment Trust may see an impact due to its involvement in mortgage lending and servicing.
• RXDX - Rocket Mortgage LLC could be affected as a significant player in the mortgage industry.