The reported move would be the latest in an ongoing effort to reduce credit reporting costs
The mortgage industry, including several large trade organizations, has made the reduction of credit reporting costs one of the major talking points of the last two years. The Federal Housing director has been listening.
Federal Housing Finance Agency director Bill Pulte (pictured top) is expected to announce a move to a bi-merge requirement for Fannie Mae and Freddie Mac at the Mortgage Bankers Association annual event on October 12 in Chicago, according to Bloomberg News.
If that occurs, that would require a pull of just two of the three bureau scores when obtaining an agency mortgage.
Pulte is scheduled to sit down with MBA president and CEO Robert Broeksmit at the event. Broeksmit has been an outspoken critic of the cost of credit reporting and has suggested a single-pull requirement for strong credit borrowers.
“The tri-merge credit reporting requirement has become a license for price gouging and ripping off consumers,” Broeksmit said in a January blog post. “MBA and its members have had enough. Shielded by a government-granted oligopoly, the credit bureaus have used a no-choice system to raise prices and resist competition at the expense of mortgage borrowers and lenders.”
Pulte making moves
The Broker Action Coalition (BAC) has been highly critical of the increasing costs of credit reporting. It has also criticized the fact that a large portion of the workforce of the three bureaus is stationed outside the United States.
Brendan McKay, chief advocacy officer and co-founder of the BAC, has seen the effect that Pulte's posts on his X account have had on the credit score cost issue.
"The noise he's making about the bureaus, for the first time in a real way, matters,” McKay told Mortgage Professional America. “You can look at their stock prices and see that."
McKay and the BAC have also been talking about creating a way to make credit scores portable, allowing borrowers to shop around based on the same credit pull, reducing the costs of multiple pulls for one transaction.
More credit score changes
Another possible change that Pulte has floated on social media is opening up Fannie Mae and Freddie Mac’s internal scoring model, which could give originators another option, especially if it can be done on non-agency loans.
“The most interesting, although nuanced and complicated story, that long-term could have the biggest impact, is opening up the box of the credit decision-making process within DU and LP,” McKay said.
Both credit scores and Fannie and Freddie’s internal model serve the same purpose: to provide a predictive model of loan risk.
If this becomes widespread, McKay envisions a world where the mortgage industry relies less on credit scores.
“(Pulte) said those are going to become publicly available,” McKay said. “It will definitely be available as loans are being securitized, so it'll get out eventually. That's a massive deal. It could mean the end of credit scores for a lot of mortgages, not all. It's not the death of credit scores — auto companies will still probably use them."
Still work to be done
The credit reporting issues likely won’t go away even with a move to bi-merge. Kimber White, outgoing president of the National Association of Mortgage Brokers (NAMB), said there needs to be an effort to make sure all credit reporting is done to all three bureaus.
“If you want to fix this, you get the bureaus together and get their reporting figured out,” White told Mortgage Professional America in December. “How about us going down to the bureaus and saying, ‘Figure out how y'all can report together.’ That fixes it. The big difference is the way it's reporting and who it’s reporting to. We have AI. We have the best ability to pull data in the world right now, but the credit reports are still a mystery. That makes no sense to me.”
Nevertheless, it appears to be the latest example of Pulte getting changes to the mortgage industry done first by posting about it on social media. McKay said he urges brokers to not only follow along with what Pulte is saying, but be sure to engage with him to encourage continued industry reforms.
"Pulte matters, and he can make change — his tweets make change,” McKay said. “You can look at the stock prices of the credit bureaus since he started posting about it. I'm telling all brokers right now — if you're on Twitter, set a notification anytime he tweets. If you see him tweet anything about credit scores or credit reports, respond with one of our one-pagers."
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