Original Additional Credit FHA Pilot Program Authorization Act
- Sponsor
- Rep. Green, Al [D-TX-9]
- Committees
- Financial Services Committee (primary)
- Last action
- Apr 16, 2026
Bottom line
The bill authorizes a new FHA pilot program to expand access to FHA-insured mortgages by incorporating alternative credit data, aiming to serve a broader range of borrowers while monitoring financial risk.
What it actually does
This bill amends Section 258 of the National Housing Act to establish a pilot program allowing the Federal Housing Administration (FHA) to use "additional credit information" (beyond traditional credit scores) for assessing the creditworthiness of prospective mortgagors who opt into the program. It aims to evaluate the benefits of using such models, particularly for borrowers with thin or no traditional credit files, and requires detailed reporting to Congress on the program's effectiveness and impact on the Mutual Mortgage Insurance Fund.
Proponents argue
Supporters argue this bill will expand homeownership opportunities for underserved populations, including those with limited traditional credit histories, by allowing the FHA to consider a more comprehensive view of their financial responsibility. They believe it can lead to more equitable access to credit and potentially reduce disparities in mortgage lending, without necessarily increasing risk if properly managed and evaluated.
Opponents contend
Opponents might express concerns that using "additional credit information" could introduce new, unproven risks to the FHA's Mutual Mortgage Insurance Fund, potentially exposing taxpayers to greater liability if these new models are less effective at predicting default. They might also worry about the fairness and transparency of alternative credit scoring models, and the potential for unintended consequences or algorithmic bias.
The bill is concise and relatively easy to read, allowing a thorough understanding of its provisions within a short timeframe.
Section 2(1) and 2(5) amending Section 258(a) and inserting new subsection (b)
Authorizing FHA Pilot Program for Additional Credit Information
This provision renames and expands an existing pilot program under the National Housing Act. It explicitly authorizes the Secretary of HUD to establish and carry out a pilot program to provide "additional credit rating information" for prospective mortgagors who choose to participate. The goal is to examine and evaluate the benefits of using credit scoring models that incorporate this additional data.
Supporters argue
Supporters contend that this change is crucial for modernizing FHA lending practices, enabling more accurate assessments of creditworthiness for individuals who are financially responsible but lack extensive traditional credit histories, thereby expanding access to homeownership.
Critics contend
Critics may argue that shifting from "alternative" to "additional" credit information, while seemingly minor, could broaden the scope of data used in ways that are not fully understood or tested, potentially increasing risk to the FHA fund if the new data is less predictive of default.
Tradeoffs
Balances the goal of expanding homeownership access with the need to maintain the financial soundness of the FHA insurance fund.
Section 2(6) inserting new subsections (d) and (e)
Model Selection and Borrower Opt-In & Comparison Requirements
The bill directs the Secretary of HUD, in consultation with Ginnie Mae, to select one or more commercially available credit scoring models that use additional data within one year of enactment. It also mandates that mortgagees provide prospective mortgagors with a notice explaining the opt-in option, how the pilot model differs from current FHA models, and information on HUD-approved housing counseling agencies. Mortgagees must also provide a comparison of lending options using both the pilot program model and the standard FHA model.
Section 2(6) inserting new subsection (h)
Comprehensive Program Evaluation and Public Reporting
This provision mandates detailed reports to Congress on the pilot program's effectiveness. Reports must include data on participation rates, approval rates, demographic information of participants, benefits to borrowers with thin/no credit files, effectiveness in predicting default, mortgagee participation, and impact on the Mutual Mortgage Insurance Fund's economic net worth ratio. Reports are due 6 months after a 2-year period of accepting scores and 1 year after a 5-year period from enactment. The Secretary must also explain the selection of models and make all reports and program information publicly available on the HUD website.
Section 2(6) inserting new subsection (j)
Funding for Pilot Program Implementation
The bill authorizes $3,000,000 for fiscal year 2023 for establishing and carrying out the pilot program, and $1,500,000 for each of fiscal years 2024 through 2027 for its continuation. This funding is intended to cover the costs associated with setting up and operating the program.
The pilot program explicitly excludes mortgages where proceeds are used to prepay or pay off an existing loan secured by the same property. This means the pilot is only for new purchase mortgages, not refinances.
Section 2(2) amending Section 258(b)
Why it matters:This is standard legislative practice for defining the scope of a program, often placed in an applicability or limitation clause. It's not necessarily evasive but could be overlooked.
Case for: Supporters would argue that limiting the pilot to new purchase mortgages reduces the complexity and risk during the initial evaluation phase, allowing the FHA to focus on expanding access to first-time homebuyers or those entering the market. It prevents the pilot from being used for potentially riskier refinance transactions until its effectiveness is proven.
Case against: Critics might argue that excluding refinances unnecessarily limits the scope of the pilot, preventing a full understanding of how additional credit information could benefit existing homeowners seeking better terms or facing financial hardship. It could be seen as a missed opportunity to test the model's broader applicability.
Estimated impact: Limits the pool of eligible participants for the pilot program, focusing its impact on new mortgage originations.
This section clarifies that a prospective mortgagor who opts into the pilot program is not precluded from subsequently obtaining a creditworthiness determination using information other than that provided under the approved pilot program credit scoring model. In essence, opting into the pilot doesn't lock a borrower into only that assessment.
Section 2(6) inserting new subsection (f)
Why it matters:This is a consumer protection measure, ensuring flexibility for borrowers. Its placement is logical within the new subsections.
Case for: Proponents would highlight this as an important consumer safeguard, ensuring that borrowers are not disadvantaged by trying out the pilot program. It provides an "opt-out" mechanism for the assessment method, even if they initially opted in.
Case against: No specific opposition, as it enhances borrower flexibility. Some might argue it adds a layer of complexity to the underwriting process for lenders.
Estimated impact: Provides a safety net for borrowers, potentially increasing willingness to participate in the pilot.