MBA renews press for limited single report as scores compete

Now that there are formal government-sponsored enterprise guidelines for score modernization that help fulfill a legislative mandate, the Mortgage Bankers Association's top executive has a plan he calls a safe way for the secondary market to make the purchase of credit reports more competitive too.

With the two large mortgage buyers starting to open up the Classic FICO score they have heretofore exclusively accepted to compete with another metric the three credit bureaus are behind, the MBA renewed its call to create more rivalry between members of the trio too.

Bureau competition is in the spirit of the legislative mandate and the competition that Fannie Mae and Freddie Mac's oversight chief, Bill Pulte, backs. However, he's been reluctant to immediately greenlight the move, which is not specifically called for in the law and faced opposition from another industry group, the Community Home Lenders of America.

There are ways to make a single report an option that could address critics' concerns around an incomplete picture of the borrower when all three reports aren't examined and concerns about gaming the system, according to MBA President and CEO Bob Broeksmit.

"Our support is not a call for wholesale elimination of the tri-merge across all borrower categories, but a targeted, evidence-based modernization that will safely introduce competition," he said in a report released Thursday.

A plan for minimizing gaming, differences

In addition to reiterating that a plan to only apply the option as a means to reduce costs for higher-score borrowers, citing data suggesting variations between reports are more minimal, Broeksmit suggested measures aimed at addressing concerns lenders may choose the report that gives consumers the best deal rather than accurately reflecting their risk.

"For example, lenders should be prohibited from pulling multiple reports/scores and cherry picking the highest — if you pull three reports/scores, you must submit all three," he suggested. "Lenders could also be required to select a specific bureau — who would compete for that business — for the initial credit pull."

The credit reporting industry's response

While the MBA proposal aims to address some valid concerns, the change is not worth the risk it poses to a major financial decision like a mortgage, according to the Consumer Data Industry Association, a group that represents the credit bureaus and other related companies.

"The MBA's proposal to limit credit reporting for 'strong' borrowers sounds reasonable on the surface, but it asks lenders to make that determination before they have the full picture," the CDIA said in an emailed statement. "That's not modernization. That's asking consumers to trust that one snapshot is enough when three independent data sources exist. Our position is simple: more data, not less, when the stakes are this high."