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CHLA Releases White Paper on Mortgage Credit Score Markets and Pricing 

CHLA Releases White Paper on Mortgage Credit Score Markets and Pricing 

White Paper provides a broad overview of the credit score market landscape, the credit score process, and recommendations to ensure the market remains fair for all stakeholders 

(Washington, D.C) – The Community Home Lenders of America (CHLA) released today a white paper entitled “Mortgage Credit Score Markets and Pricing – How to Ensure The Market Remains Fair to All Borrowers” which aims to provide policymakers and the public with guidance on the credit scoring process and recommendations to ensure the credit market remains fair for all industry stakeholders. 

“FICO’s 2024 price hike in addition to last year’s adjustment will result in a 500% increase for borrowers,” said Rob Zimmer, Director of External Affairs at CHLA. “This is an unwarranted increase facilitated in large part by the quasi-monopoly pricing power that FICO enjoys and will only exacerbate an already challenging environment for both lenders and borrowers.”

CHLA has been a strong critic of FICO’s unjustified price hikes, with a letter in November of 2022 arguing that these credit pricing disparities are non-transparent and will negatively impact minorities and underserved borrowers. 

FHFA’s bi-merge credit report transition to FICO™ 10T and VantageScore® 4.0, which will occur in two phases over the span of 2024 and 2025, is a step toward creating alternatives to the FICO quasi-monopoly. However, this transition will be a significant change for the mortgage industry. 

In order to decrease costs for consumers and ensure a smooth transition, CHLA recommends that FHFA should retain tri-merge and allow the lender and consumer a choice between FICO™ 10T and VantageScore® 4.0, rather than requiring just one solution: a bi-merge plus VantageScore® 4.0. This will ensure that one of the new models is serving underserved borrowers without disrupting their ability to compare all mortgage products, FHA, VA, USDA, all of which still require a tri-merge credit review. 

Additionally, the White Paper notes CHLA’s concerns with this implementation timeline as bi-merge credit reporting requires lenders to double their amount of credit pulls in order to properly assess credit risk. This change is unlikely to save borrowers money, but rather increase their costs when pulling credit, especially impacting veterans, rural Americans, and low- to moderate-income borrowers.