Association supports VantageScore addition to mortgage processing, warns against potential price hikes
The Community Home Lenders of America (CHLA) has commended Federal Housing Finance Agency (FHFA) director Bill Pulte for his recent decisions concerning mortgage credit scoring but also expressed significant concerns about market dynamics and proposed further reforms to enhance competition and protect consumers.
In a letter on Wednesday, CHLA – a national trade association representing small and midsized independent mortgage banks – lauded Pulte’s swift action in adding the VantageScore product to mortgage processing, providing lenders with an alternative to FICO scores. The association also praised the decision to maintain the “tri-merge” credit report regime, noting that a shift to a bi-merge model would have complicated existing mortgage channel requirements and failed to reduce costs for consumers and lenders. CHLA views these actions as a crucial first step in addressing what they describe as a “monopoly marketplace” previously dominated by Fair Isaac.
Concerns over anticipated price hikes
Despite the positive initial changes, CHLA reported “industry chatter” indicating that Fair Isaac is expected to raise prices again this fall. This would mark the fourth consecutive year of significant price increases. The association believes these hikes are anticipated partly because Fair Isaac expects VantageScore to require considerable time to gain market traction due to technical reasons. This concern underscores CHLA’s view that the marketplace remains vulnerable to unchecked pricing power.
Recommendations for future action
To counter these ongoing challenges, CHLA has urged Pulte to continue his leadership. The association specifically called for the FHFA to demand a halt to any further mortgage credit score price increases. Additionally, CHLA recommended convening an FHFA Task Force to review recent cost hikes and explore further reforms. The goal of this task force would be to introduce more competitors, thereby safeguarding against potential “duopolistic pricing” that could harm consumers.
CHLA proposed that Fannie Mae and Freddie Mac’s guidelines be revised to generically require credit scores, removing the explicit mention of “Fair Isaac” by name. The association argues that naming a specific company inhibits innovation and competition.
The association also reiterated its recommendation for the Government-Sponsored Enterprises (GSEs) to establish their own business subsidiaries for evaluating borrower creditworthiness. These entities, once proven reliable, could then be sold into the open market, serving as “independent umpires” and fostering greater competition while potentially providing an additional return on GSE assets.
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