Executives propose changes to remove 'almost predatory' fees and reduce restrictions
Skyrocketing credit report costs are a growing scourge for mortgage borrowers and brokers alike – and moving to bring those fees lower requires urgent action, according to the National Association of Mortgage Brokers (NAMB).
The announcement, in November, by Fair Isaac Corp. (FICO) that it was hiking its wholesale royalty mortgage origination fee by $1.45 per score drew widespread criticism throughout the industry, with single borrower costs for tri-merge credit reports also expected to climb.
NAMB president Jim Nabors (pictured, top left) hit out at those rising costs and said the association was proposing a simplified structure to ease some of the price pressures for borrowers. “The cost is just way too high,” he told Mortgage Professional America. “It’s unjustified, and it’s almost predatory that they’re raising these prices. They really don’t have a reason – and they’re not competitive on prices.
“We have a suggestion: the borrower is entitled to a free credit report once a year. They should also be able to get their credit score, and then some of the rules can be changed so that the borrower can use that and be able to pass it on to any credit they choose to do business with.”
Valerie Saunders (pictured, top right), NAMB’s chief executive strategist, pointed out that, in addition to FICO’s charges, borrowers are required to pay three credit bureaus’ fees – and the credit reporting company providing the reports is also a third party to the bureaus.
“So if you went to just one score, and you allowed the lender to make a decision of only accepting Equifax, or Experian, or TransUnion, and just made that across the board – that would be fair.”
Credit bureaus a continuing headache for borrowers
TRID (the TILA-RESPA Integrated Disclosure Rule), which governs mortgage costs disclosures including credit report fees, said the cost of a credit report in 2013 was about $25. That means it’s since surged by about 200%, Saunders highlighted.
The need to navigate three different bureaus is also presenting challenges for customers who need to flag an error in their report.
“If somebody does have something that is impacting their credit – maybe it’s an inaccurate trade line or a collection amount that’s already been paid – right now, the consumer has to go to all three bureaus to get it removed,” Saunders said, “which is why you see a lot of these credit rescoring models or people having to go to credit counseling. If you only had to go to one, it would happen a lot faster because you’re only having to fix it once.”
Unsurprisingly, credit bureaus have shown little appetite for reforming the current model despite growing clamor within the mortgage industry.
Nabors described their stance as arrogant. “It’s ‘we’re the credit bureaus. We can raise prices whenever we want. What are you going to do? You have no other options,’” he said. “I think it’s something that the regulators need to really look into, because it’s price gouging.”
GSE refinancing restrictions also unfair, association argues
NAMB is also calling for reform on Fannie Mae and Freddie Mac’s guidelines regarding the timing of refinancing transactions. Currently, for cash-out refinance transactions both entities require that the existing mortgage be seasoned for at least 12 months, meaning the borrower must have made at least 12 consecutive monthly payments on their mortgage before being eligible.
The Trump admin’s regulatory changes continue, but Fannie Mae and Freddie Mac’s future remains uncertain. Kevin Ryan of Better .com says privatization is “doable, but complicated,” requiring work on capital standards and returns.https://t.co/Xp1BMBdmk5
— Mortgage Professional America Magazine (@MPAMagazineUS) February 6, 2025
But Saunders said that was a potential hindrance for scores of homeowners down the line this year. “If rates do decline, it’s unfair to tell somebody how they can utilize the equity they’ve built up in their home and take advantage of a lower rate,” she said. “So we’re looking for it to go back to the six-month restriction as opposed to 12 months.”
For Nabors, there’s little sense in requiring borrowers to wait for a year to refinance instead of six if the rate is lower and their payment would fall. “The only advantage is that the lender is going to make more money – and there’s no upside to that,” he said.
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