Mortgage Loans and Credit Report Fees
May 25, 2024
If you want to buy a home with an FHA loan, a VA mortgage, or a conventional loan, you’ll need to sign documents giving your lender permission to pull your credit reports. You are also responsible for paying the fees for these reports as a typical part of doing business with a home loan.
Those fees have increased substantially over the last few years. Consumer Financial Protection Bureau Director Rohit Chopra notes, “The credit reporting industry is dominated by three players” including Equifax, Experian, and TransUnion.
Chopra also notes, “The market for credit scores has long been dominated by one company’s algorithm: the Fair Isaac Corporation, which sells the FICO score” and that home loan lenders have complained that “costs for credit reports and scores have increased, sometimes by 400% since 2022.”
What do you need to know about the costs of consumer credit reports and what the federal government is doing about them?
CFPB Calls out the Credit Reporting Industry
The Director of CFPB gave some prepared remarks to a meeting of the Mortgage Bankers Association in 2024. According to the speech by Rohit Chopra, there is a lack of redress for consumer credit report price gouging and CFPB efforts are turning to this problem.
“Most mortgage lenders purchase a credit report from resellers, who submit requests to Equifax, Experian, and TransUnion to obtain information about a borrower,” Chopra says. “Mortgage companies generally order a single credit report to initially determine if a borrower qualifies for a loan program.”
If the borrower’s credit scores exceed a certain amount, “the report can be automatically or manually converted to a report that includes all three reports, sometimes referred to as a tri-merge.”
FICO Score Costs
But the costs of these reports from FICO keep going up and mortgage lenders have no alternative but to pay. They may pass the higher costs to the borrower. That’s a situation Chopra describes as a”captive customer base.”
Because these fees increase when there’s more than one borrower on the mortgage, the process and pricing become more complicated. That’s something CFPB wants to change, hoping some form of competition might ease the price increases.
CFPB is analyzing these costs and working with industry partners to address the issue, but Chopra notes, “...CFPB is looking at ways to accelerate the shift to ‘open banking’ in the U.S.”
including giving loan applicants “the ability to permission transaction and other financial data to potential lenders” which could help lenders better assess the risk of an individual loan.
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The ARM is an FHA Adjustable Rate Mortgage
A Few Tips About Your Fixed Rate Mortgage
Monthly Payments Establish Good Credit
Those fees have increased substantially over the last few years. Consumer Financial Protection Bureau Director Rohit Chopra notes, “The credit reporting industry is dominated by three players” including Equifax, Experian, and TransUnion.
Chopra also notes, “The market for credit scores has long been dominated by one company’s algorithm: the Fair Isaac Corporation, which sells the FICO score” and that home loan lenders have complained that “costs for credit reports and scores have increased, sometimes by 400% since 2022.”
What do you need to know about the costs of consumer credit reports and what the federal government is doing about them?
CFPB Calls out the Credit Reporting Industry
The Director of CFPB gave some prepared remarks to a meeting of the Mortgage Bankers Association in 2024. According to the speech by Rohit Chopra, there is a lack of redress for consumer credit report price gouging and CFPB efforts are turning to this problem.
“Most mortgage lenders purchase a credit report from resellers, who submit requests to Equifax, Experian, and TransUnion to obtain information about a borrower,” Chopra says. “Mortgage companies generally order a single credit report to initially determine if a borrower qualifies for a loan program.”
If the borrower’s credit scores exceed a certain amount, “the report can be automatically or manually converted to a report that includes all three reports, sometimes referred to as a tri-merge.”
FICO Score Costs
But the costs of these reports from FICO keep going up and mortgage lenders have no alternative but to pay. They may pass the higher costs to the borrower. That’s a situation Chopra describes as a”captive customer base.”
Because these fees increase when there’s more than one borrower on the mortgage, the process and pricing become more complicated. That’s something CFPB wants to change, hoping some form of competition might ease the price increases.
CFPB is analyzing these costs and working with industry partners to address the issue, but Chopra notes, “...CFPB is looking at ways to accelerate the shift to ‘open banking’ in the U.S.”
including giving loan applicants “the ability to permission transaction and other financial data to potential lenders” which could help lenders better assess the risk of an individual loan.
------------------------------
RELATED VIDEOS:
The ARM is an FHA Adjustable Rate Mortgage
A Few Tips About Your Fixed Rate Mortgage
Monthly Payments Establish Good Credit
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Learn what your score means.
