Home News Homebuyers face 91% increase for credit reports starting Jan. 1 – Orange County Register

Homebuyers face 91% increase for credit reports starting Jan. 1 – Orange County Register

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Last Monday morning, after reading a price increase notice from my company’s former mortgage credit reporting vendor, Equifax Mortgage Services, I choked on my coffee.

Starting January 1, joint (spousal) credit reports by FICO score will rise from $39.01 to $74.53, according to the notice. This is a 91% price increase, or almost double the price. What?

But wait, it gets worse.

Terry Clemans, executive director of the National Consumer Reporting Agency, wrote a letter confirming that the majority of the mortgage industry is most likely to see a “significant increase in mortgage credit report prices in 2023.” sent to me

“This is a paradigm shift in the pricing structure of the credit score, directed by the three national credit bureaus and/or FICO to the mortgage credit reporting industry,” the letter said.

Tiered pricing includes wholesale price increases of less than 10% for approximately 46 top-tier lenders, approximately 200% for six mid-tier lenders, and over 400% for all other mortgage lenders. will be The NCRA letter continues. There was no lender’s name.

Overall, this bodes dire for anyone buying, selling, or refinancing property.

A sharp rise in prices is an unspoken go-ahead from mortgage regulators and policy makers for all other real estate payment providers to consider similar tactics. In other words, if credit scoring companies can raise their fees, how can we stop other companies, such as underwriters, from following suit?

How FICO’s Credit Scoring System Works

The front and center of the mortgage loan approval process is the credit report prepared by the mortgage loan originator. This report comes from all three credit bureaus (Experian, Equifax, and TransUnion) and includes his FICO credit score to accompany it.

Lenders typically use the lowest intermediate FICO score to approve or reject loans and loan pricing. The higher his FICO in the middle, the higher the rate and the lower the cost of the outgoing point. The industry calls this a triple credit report. Without a credit report, you have no chance of getting a mortgage.

FICO, also known as Fair Isaac Corp., and these three credit companies dominate credit reporting from the three mergers. No other choice — not yet.

The Federal Housing Finance Agency (Fannie Mae and Freddie Mac regulator and administrator) recently approved Vantage Score as another credit scoring system for mortgage lenders. The FHFA noted that the Vantage Score could take several years.

Vantage Score is jointly owned by three major credit bureaus and will be a ‘competitor’ to FICO.

Consumer credit bureaus such as Kroll, CoreLogic Credco, and even another division of Equifax (Equifax Mortgage Services) purchase credit information and credit score information, mark up costs, and then aggregate it with the borrower’s triad. Sell ​​your credit reports to mortgage companies. Which borrower applies for her mortgage credit.

Mortgage lenders and mortgage originators are prohibited by federal law from increasing prices on credit reports. It’s a straight pass-through consumer rate.

I contacted FICO because I had some questions about the price increase. Here are some of the company’s responses.

Starting in December, FICO adopted a tier-based royalty structure for mortgages. This is based on the amount of his FICO score provided to the lender. According to Scores-FICO’s executive vice president, Jim Wehmann, this royalty increase will allow FICO to trim up to $50 from his report, which totals about $2 for all three scores. Collect $8 from

Wehmann declined to provide a number of FICO scores for mortgages offered each year. He also did not disclose the names of his 46 lenders in the first tier and his 6 lenders in the second tier. FICO also did not explain how much credit report usage fees above $50 would increase. Nor does he explain why prices for some mortgage he brokers (like mine) are up 91%.

Who will pay for the report?

Mortgage lenders and mortgage brokers have paid a large amount upfront against mortgage applicants’ credit reports as a cost of doing business. They bill the borrower at closing. Federal law allows mortgage lenders/brokers to charge applicants upfront on their credit report.

Lenders typically cover the cost of credit checks on both canceled loan applications and denied loans.

In my experience as a mortgage broker, I fund a mortgage for about one borrower for every three creditable applicants. Borrower sobriety, borrower snagging by competitors, or refusal of loans are usually the cause of loan failures. I’m probably the epitome of the industry.

By offering tiered pricing, I asked FICO also estimates the number of mortgage companies at risk of going out of business due to price discrepancies. Do you? FICO declined to comment.

Representatives for FHFA, TransUnion and Experian declined to comment. But Equifax responded.

An Equifax spokesperson explained the tiered pricing and acknowledged the price increase letters received by the mortgage lenders, adding that FICO’s price increase was “unprecedented in the scale of the increase and many of customers have received price increases of more than 400%.”

What about the legality of this?

Attorney Mike Hensley said, “This increase is puzzling because brokers have to hand over to their residential clients.” , may give rise to unjustified claims.”

freddie mccrate news

The 30-year fixed rate averaged 6.58%, 3 basis points lower than last week. 15-year fixed rates averaged 5.9%, 8 basis points lower than last week.

The Home Loan Bankers Association reported a 2.2% increase in mortgage applications from the previous week.

Bottom line: Assuming borrowers receive an average fixed rate of 30 years on a matching $647,200 loan, last year’s payment is $1,361 less than this week’s $4,125 payment.

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