PART 1254—VALIDATION AND APPROVAL OF CREDIT SCORE MODELS Authority: 12 U.S.C. 4511, 4513, 4526 and Sec. 310, Pub. L. 115-174, 132 Stat. 1296. Source: 84 FR 41904, Aug. 16, 2019, unless otherwise noted. § 1254.1 Purpose and scope. (a) The purpose of this part is to set forth standards and criteria for the process an Enterprise must establish to validate and approve any credit score model that produces any credit score that the Enterprise requires in its mortgage purchase procedures and systems. (b) The validation and approval process for a credit score model includes the following phases: Solicitation of Applications, Submission of Applications and Initial Review, Credit Score Assessment, and Enterprise Business Assessment. § 1254.2 Definitions. For purposes of this part, the following definitions apply. Definitions of other terms may be found in 12 CFR part 1201, General Definitions Applying to All Federal Housing Finance Agency Regulations. Credit score Credit score model Credit score model developer Days Mortgage Person § 1254.3 Computation of time. For purposes of this part, each time period begins on the day after the relevant event occurs (e.g., § 1254.4 Requirements for use of a credit score. (a) Enterprise use of a credit score. (1) The credit score must be derived from a credit score model that has been approved by the Enterprise in accordance with this part; and (2) The Enterprise must provide for the use of the credit score by any automated underwriting system that uses a credit score and any other procedures and systems used by the Enterprise that use a credit score for mortgage purchases. (b) Replacement of credit score model. (c) No right to continuing use. § 1254.5 Solicitation of applications. (a) Required solicitations. (1) The requirement to submit a Credit Score Solicitation to FHFA for review; (2) A deadline for submission of the Credit Score Solicitation; and (3) A timeframe for the solicitation period. (b) Credit Score Solicitation. (1) The opening and closing dates of the solicitation time period during which the Enterprise will accept applications from credit score model developers; (2) A description of the information that must be submitted with an application; (3) A description of the process by which the Enterprise will obtain data for the assessment of the credit score model; (4) A description of the process for the Credit Score Assessment and the Enterprise Business Assessment; and (5) Any other requirements as determined by the Enterprise. (c) Review by FHFA. (d) Publication. (e) Initial solicitation. § 1254.6 Submission and initial review of applications. (a) Application requirements. (1) Application fee. (2) Fair lending certification and compliance. (3) Use of model by industry. (4) Qualification of credit score model developer. i.e., (i) Corporate structure, including any business relationship to any other person through any degree of common ownership or control; (ii) Governance structure; and (iii) Past financial performance. (5) Other requirements. (b) Historical consumer credit data. (c) Acceptance of applications. (1) Notice of status. (2) Complete application. § 1254.7 Credit Score Assessment. (a) Requirement for Credit Score Assessment. (b) Testing for Credit Score Assessment. (c) Criteria for Credit Score Assessment. (1) Testing for accuracy. (i) Initial Credit Score Assessment. (ii) Subsequent Credit Score Assessments. (2) Testing for reliability. (3) Testing for integrity. (4) Other requirements. (c) Third-party testing. (1) An Enterprise; or (2) An independent third party selected or approved by an Enterprise. (d) Timing of Credit Score Assessment. (2) An Enterprise must provide notice to the applicant within 30 days of a determination that the application has passed the Credit Score Assessment. § 1254.8 Enterprise Business Assessment. (a) Requirement for Enterprise Business Assessment. (b) Criteria for Enterprise Business Assessment. (1) Accuracy; reliability. (2) Fair lending assessment. (3) Impact on Enterprise operations and risk management, and impact on industry. (4) Competitive effects. (5) Third-Party Provider Review. (6) Other requirements. (c) Timing of Enterprise Business Assessment. (d) FHFA Evaluation. (1) Require an Enterprise to undertake additional analysis, monitoring, or reporting to further the purposes of this part; (2) Require an Enterprise to permit the use of a single credit score model or multiple credit score models; or (3) Require any other change to an Enterprise program, policy, or practice related to the Enterprise's use of credit scores. § 1254.9 Determinations on applications. (a) Enterprise determinations subject to prior review and approval by FHFA. (b) Approval of a credit score model. (c) Disapproval of a credit score model. § 1254.10 Withdrawal of application. At any time during the validation and approval process, an applicant may withdraw its application by notifying an Enterprise. The Enterprise may, in its sole discretion, determine whether to return any portion of the application fee paid by the applicant. § 1254.11 Pilot programs. (a) Pilots permitted; duration of pilots. (b) Prior notice to FHFA.