MBA presses FHFA to drop tri-merge credit report rule

The Mortgage Bankers Association is standing firm on its initiatives to help lenders find credit-report cost relief with its latest call to eliminate the tri-merge purchase requirement for a segment of borrowers. 

In a letter addressed to Federal Housing Finance Agency Director Bill Pulte in mid December, MBA requested that the regulator, which oversees the government-sponsored enterprises, direct the GSEs to accept a single credit-report pull when the data demonstrates the strength and solid financial health of borrowers within the segment. 

"We strongly urge you to end the requirement for a tri-merge credit report for every loan purchased by Fannie Mae and Freddie Mac and instead allow lenders the option to rely on a single credit report if the initial report has a credit score of 700 or above," said the letter, which was signed by MBA President and CEO Bob Broeksmit. 

MBA repeated past assertions that current federal tri-merge policies, which mandate the purchase of three credit reports for mortgages in order to make them eligible for sale to government-sponsored enterprises, constituted a monopoly. Broeksmit pointed out current GSE requirements created a market lacking competition, and lenders are now facing credit reporting price hikes for four consecutive years. 

MBA's letter comes after the three major credit bureaus, Equifax, Experian and Transunion, proposed another increase in costs in late November. Adjustments to the cost of credit-score pulls over the past three years has driven up prices exponentially, lenders claim, with the latest proposal estimated to increase costs by an additional 35% to 50% for most pulls. 

"Predictably, a market with only three providers, and a mandate to purchase a report from all three, subjects the industry to price increases with no available alternative or countervailing price pressures," the letter stated.

Pushing back, the National Consumer Reporting Association described such claims as an "attack by those who support a one-credit report-fits-all in mortgage lending" in a Linkedin post. 

"No two consumers are the same. That's why when consumers are making the most significant financial decision of their lives, lenders should look at them as a whole person. 

"Consumers are more than their credit report, and they are more than just one credit report," NCRA said. 

MBA points to its data

In justifying a policy change for what it sees as the most creditworthy borrowers, MBA said its own research showed little need for three credit reports. 

"MBA members have reviewed their own data and found narrow variances in tradeline coverage and credit scores on borrowers with credit scores of 700 and above," Broeksmit wrote, adding a tri-merge requirement for such customers "adds costs but little additional value in risk prediction."

Broeksmit also added that virtually every other consumer-borrower segment, including home equity, auto and unsecured lending, are currently using single-file reports safely.

Why mortgage lenders want changes

A frequent point of contention among mortgage lenders is the need to request credit reports multiple times in the application process. Costs are incurred for each pull from each report provider, regardless of whether customers choose to originate a loan.

Credit bureaus have countered that increased costs for scores and processing fees necessitate increased report costs. The two leading credit score providers, Fair Isaac Corp. and Vantagescore, are currently engaged in a widely publicized dispute over the accuracy and value of their respective scores, and introduced various cost incentives to encourage use of their metrics, including a FICO licensing program that would bypass the bureaus altogether. 

Adding an additional wrinkle to the controversy is the three credit bureau's joint ownership of Vantagescore. Fueling the credit score feud was Pulte's announcement this summer that opened up the use Vantagescore metrics in mortgage lending, a domain that long belonged to FICO.