Original Alternative Data for Additional Credit FHA Pilot Program Reauthorization Act
- Sponsor
- Rep. Green, Al [D-TX-9]
- Committees
- Financial Services Committee (primary)
- Last action
- Apr 15, 2026
Bottom line
This bill aims to expand access to FHA-insured mortgages for borrowers with limited traditional credit history by incorporating non-traditional credit data, while also ensuring robust oversight and evaluation of the program's outcomes and risks.
What it actually does
This bill reauthorizes and modifies an existing FHA pilot program to allow for the use of "additional credit information" (formerly "alternative data") in assessing the creditworthiness of mortgagors and prospective mortgagors. It mandates the Secretary of HUD to select commercially available credit scoring models that utilize this data, requires mortgagees to provide clear notification and comparison options to borrowers, and establishes comprehensive reporting requirements to Congress on the program's effectiveness and impact on the Mutual Mortgage Insurance Fund.
Proponents argue
Supporters argue that this reauthorization will help address systemic barriers to homeownership for underserved populations, particularly those with limited traditional credit history, by allowing FHA to consider a broader range of financial data, thereby promoting financial inclusion and equitable access to housing opportunities.
Opponents contend
Critics might express concerns that expanding the types of data used for credit assessment could introduce new, unproven risks to the Mutual Mortgage Insurance Fund, potentially leading to higher default rates if the "additional data" models are not as predictive as traditional scores, or that it could lead to unintended biases if not carefully implemented and monitored.
The bill is relatively short and clearly structured, making it accessible for a reader to understand its core provisions within a reasonable timeframe.
Section 2(1), (2), (4), (7) amending Section 258(a), (b), (d), (k) of the National Housing Act
Reauthorization and Modification of FHA Pilot Program
This provision reauthorizes the FHA pilot program under Section 258 of the National Housing Act, changing the terminology from "alternative" to "additional" credit information. It clarifies that participation is elective for mortgagors and explicitly prohibits the pilot program from being used for refinancing existing loans secured by the same property. It also extends the program's duration for another 5 years.
Supporters argue
Supporters argue that reauthorizing and clarifying the program's scope ensures that the FHA can continue to innovate in credit assessment, serving more borrowers who are creditworthy but lack traditional credit scores, thereby expanding homeownership opportunities.
Critics contend
Some might argue that extending the program without a full evaluation of the previous iteration's results could expose the FHA fund to undue risk, especially if the new "additional data" models prove less reliable than traditional ones.
Tradeoffs
This provision balances the goal of expanding homeownership access with the need to manage risk to the FHA's Mutual Mortgage Insurance Fund.
Section 2(5), (6) inserting new subsections (b) and (d) into Section 258
Mandate for Selecting Commercially Available Credit Scoring Models
The bill sets the goal of the pilot program to examine and evaluate the benefits of using credit scoring models that incorporate "additional data." It then mandates the Secretary of HUD, in consultation with the Government National Mortgage Association, to select one or more commercially available credit scoring models utilizing this additional data within one year of enactment. The selection process must consider criteria similar to those used by the Federal Housing Finance Agency (FHFA).
Section 2(6) inserting new subsections (e) and (f) into Section 258
Borrower Choice and Information Disclosure
This provision requires the Secretary to develop and mandate mortgagees to provide a notice to prospective mortgagors. This notice must inform them of their ability to opt into the pilot program's credit scoring model, explain how it differs from current FHA models (including data types), and list HUD-approved housing counseling agencies. Mortgagees must also provide information allowing borrowers to compare lending options using both the pilot program model and the standard FHA model. Importantly, it clarifies that opting into the pilot program does not preclude a borrower from seeking creditworthiness determination using other information.
Section 2(6) inserting new subsection (h) into Section 258
Comprehensive Program Evaluation and Public Reporting
The bill mandates the Secretary to submit detailed reports to Congress evaluating the pilot program's effectiveness. These reports must include data on participation rates, approval rates, demographic information of participants (race, ethnicity, marital status, gender, location), benefits for borrowers with thin/no credit files and other borrowers, effectiveness in predicting default, mortgagee participation, and impact on the Mutual Mortgage Insurance Fund (MMIF) and its economic net worth ratio. Reports are due 6 months after the 2-year mark of accepting scores and 1 year after the 5-year reauthorization period ends. A separate report explaining the selection of credit models is also required. All reports and program information must be made publicly available on HUD's website.
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.
Section 2(2) amending Section 258(b)
Why it matters:This is standard legislative practice for defining the scope and limitations of a program within an existing statutory framework, aiming to prevent its application to certain types of transactions.
Case for: Supporters would argue this prevents the pilot program from being used for potentially riskier refinancing activities, focusing its benefits on new homeownership or significant new investment, and protecting the Mutual Mortgage Insurance Fund from adverse selection in the refinance market.
Case against: Critics might argue that excluding refinances limits the program's potential reach and ability to help existing homeowners with thin credit histories improve their mortgage terms, especially if they could benefit from the additional data models.
Estimated impact: This provision limits the pool of eligible borrowers, potentially reducing the overall number of participants in the pilot program by excluding existing homeowners seeking to refinance.
When selecting credit scoring models, 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."
Section 2(6) inserting new subsection (d) into Section 258
Why it matters:This is standard legislative practice for incorporating existing regulatory standards by reference, aiming for consistency across federal housing finance entities and leveraging established best practices.
Case for: Proponents would argue that aligning with FHFA criteria ensures a consistent, robust, and well-vetted approach to evaluating credit models across government-backed mortgage programs, leveraging existing expertise and preventing divergent standards.
Case against: Some might argue that FHA's mission and risk profile differ from those overseen by FHFA, and strict adherence to FHFA criteria might limit FHA's flexibility to select models best suited for its specific goals, potentially hindering innovation tailored to FHA's unique borrower base.
Estimated impact: This provision influences the types of credit scoring models that HUD will ultimately select, potentially favoring models that have already undergone scrutiny for Fannie Mae and Freddie Mac, thereby shaping the technological direction of the pilot program.