Rising Costs of Credit Reports Spark Debate in Mortgage Industry

The mortgage industry is currently facing a significant debate over the rising costs associated with credit report fees, which are a component of homebuyers' closing costs. These fees, typically ranging from tens to hundreds of dollars, have surged sharply in recent years, with projections indicating an increase of 40% to 50% in 2026. The Mortgage Bankers Association (MBA) has urged the Federal Housing Finance Authority (FHFA) to allow lenders to utilize a single credit report instead of the traditional tri-merge report for borrowers with credit scores of 700 or higher.

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Currently, lenders are required to use tri-merge reports, which compile credit information from the three major credit-reporting agencies: Equifax, Experian, and TransUnion. This requirement is overseen by Fannie Mae and Freddie Mac, the largest purchasers of mortgages in the secondary market. The MBA argues that the cost of these reports has escalated, with specific examples showing a 40.4% year-over-year increase in the cost of a basic tri-merge report, rising from $33.50 to $47.05. Given that lenders typically pull credit reports twice during the mortgage process, these costs can accumulate significantly for borrowers.

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The FHFA has acknowledged the MBA's proposal but has not confirmed whether it will move forward with allowing single credit reports. A spokesperson stated that the agency is "studying a variety of options to fix the housing market." In contrast, the Consumer Data Industry Association (CDIA), representing credit-reporting firms, supports the continued use of tri-merge reports, citing their role in ensuring data accuracy and market competition.

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Critics within the industry have pointed fingers at various entities for the rising costs. The CDIA has attributed the price hikes to FICO, the provider of the classic credit score, which has increased its pricing over the years. However, FICO has responded by stating it does not control how its scores are priced by other parties.

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Some industry experts argue against the MBA's proposal to shift to single credit reports. John Ulzheimer, a credit expert, emphasized that while lenders may seek to reduce costs, the tri-merge reports provide more comprehensive information, which is crucial for making informed lending decisions. He noted, "I think most risk managers would likely tell you … that they'd never turn away more information to make a decision."

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As the debate continues, there remains uncertainty regarding the future of credit report requirements in the mortgage industry. The FHFA's ongoing review of options may lead to significant changes, but the outcome remains to be seen. The rising costs of credit reports, alongside other closing costs that can range from 3% to 6% of the loan amount, highlight the broader financial pressures facing homebuyers in today's market.

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• “The cost of the requirement to have a tri-merge report has gone up exponentially,” — Al Bingham, Loan Officer, Momentum Loans

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• “I get it that they want to save [on that expense], but to me that is an immaterial cost when you look at the cost of making a bad decision on a mortgage loan,” — John Ulzheimer, Credit Expert

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• “studying a variety of options to fix the housing market.” — FHFA Spokesperson

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