WASHINGTON — A mortgage industry trade group is urging federal regulators to fast-track adoption of an alternative credit scoring model, arguing that rising costs tied to the dominant scoring system are driving up borrowing expenses, according to reporting by Scotsman’s Guide.
The Community Home Lenders of America said in a letter Monday to Federal Housing Finance Agency Director Bill Pulte that it wants quicker integration of VantageScore 4.0 into conventional mortgage underwriting, citing what it described as monopoly-like pricing power by FICO.
The group said FICO credit score prices have risen 1,567% over the past three and a half years, pushing total credit report costs per closed loan to more than $550 when multiple pulls are required for borrowers. That compares with about $50 per loan in 2022, based on a prior survey by the organization.
‘Mortgage Inflation Run Amok’
According to the group’s updated analysis, FICO’s per-pull cost has climbed from about 60 cents in 2022 to roughly $10 today, which it characterized as “mortgage inflation run amok.” The organization, which represents small and midsized independent mortgage banks, warned that another round of price increases of up to 50% could come as early as fall 2027.
In response, a FICO spokesperson told Scotsman’s Guide that its scores represent only one component of a broader tri-merge credit report bundle. Under the current pricing model, the company said its contribution would be capped at $30 per borrower when three scores are pulled.
The spokesperson added that questions about total credit report costs should be directed to the three major credit bureaus — Equifax, Experian and TransUnion — which assemble and sell the bundled reports.
Additional Arguments
The trade group also argued that FICO’s mortgage credit score business has become a key driver of its revenue and profitability, and said no other segment of the mortgage process is as concentrated. It contended that if FICO halted its annual price increases, the broader credit scoring market would likely follow.
To reduce costs for borrowers, the group is calling on the FHFA to approve VantageScore 4.0 — a competing model developed by a company jointly owned by the three major credit bureaus — without waiting for full validation of FICO’s newer 10T model.
The association also voiced support for maintaining the current tri-merge credit reporting system, warning that proposals to move to a single-bureau system could introduce additional risk for loans backed by Fannie Mae and Freddie Mac and potentially increase costs for consumers.
Renewed Call
In addition, the group reiterated a proposal that the two government-sponsored enterprises create their own credit evaluation subsidiaries using their data and analytics capabilities, arguing that additional competitors could help inject more pricing discipline into the market.
