MBA, FHFA explore a single credit report for mortgages
Bob Broeksmit, President and CEO of the MBA, wrote on Friday in a blog post that the trade group “started studying the feasibility” of such a step. The trade group is “busy with the Trump government, and specifically FHFA, to perform the assessments that are needed to reform this process and adapt to the rest of the market for consumer financing.”
The proposal comes in the midst of rising credit report costs. The estimates of the industry suggest that in 2025 the costs of credit reports will be at least 20% higher than recording a trend of steady increase in years of trend.
FHFA director Bill Pulte has indicated that credit score prices are a top priority and changes to the credit reporting requirements for mortgages purchased by the government sponsored (GSEs) are on the Horizon.
Broekmit noted that individual credit reports are already widely used in other credit products, such as equity and car loans, without adverse results. He argued that the Tri-Merge system is an inheritance of a time when the quality and coverage of credit report varied considerably.
“Early indications from discussions with our members strongly suggest that a single report for mortgages would be possible without being an unnecessary risk for the GSEs,” Broeksmit wrote. “Although a Tri-Merge is required for GSE loans, the GSEs do not use credit scores to make decisions about credit reduction, and there seems to be a limited additive value in the data in multiple reports.”
Under the Biden administration, FHFA announced plans to switch from a tri-merge to a BI-Merge system for Fannie Mae And Freddie Mac.
The change, introduced to promote competition and lower the costs, also included the acceptance of newer score models – Fico 10T and VANTASCORE 4.0 – which replaced the long -term classic Fico score. That transition is expected to start in Q4 2025, but has since been delayed.
The MBA recently sent a letter to FHFA in which the agency was encouraged to collaborate with industry experts in identifying ways to reduce the costs of credit reports. According to Broeksmit, the trade group is planning to “continue our research” in the viability of a single credit report for mortgage loans.
“In a truly competitive market, a requirement with one report would lead to both higher quality services,” said Broeksmit. “Unfortunately, government mandates for a Tri-Merge report isolated providers from competitive pressure, so that they can increase prices with little attention to quality, performance or innovation.”
