MBA questions price increase, calls for federal review on consumer impact
Fair Isaac Corp. (FICO), the company behind the widely used FICO credit score, has raised its wholesale royalty fee for mortgage-related credit scores from $3.50 to $4.95 per score, a 41% increase. The announcement has stirred frustration in the mortgage industry, with leaders voicing concerns over the rising costs associated with credit reporting for home loans.
“On October 30, 2024, we notified the credit bureaus that, for 2025, FICO’s wholesale royalty will be $4.95 per score for mortgage originations,” FICO executive vice president Jim Wehmann said. “We have chosen to communicate in this forum because there remains a substantial amount of misinformation and confusion around FICO’s role in the mortgage industry, the wholesale royalty we receive, and the downstream markups to the FICO® Score price charged and retained by the credit bureaus and their tri-merge resellers.”
Addressing confusion surrounding FICO’s role, Wehmann said FICO’s royalty makes up about 15% of the total cost of the tri-merge credit report and score bundle, which typically ranges from $80 to over $100.
“[It’s] an exceedingly small share of overall mortgage closing costs,” he said in a statement.
However, the price hike has mortgage professionals worried about the potential for further downstream cost increases from credit bureaus and their resellers, which could ultimately impact lenders and consumers.
Bob Broeksmit, president and CEO of the Mortgage Bankers Association (MBA), voiced the industry’s concerns, emphasizing that mandated use of FICO scores and tri-merge reports for many loans limits options for lenders.
“MBA remains deeply frustrated by the annual price hikes for tri-merge credit reports and other credit reporting products,” Broeksmit said. “Lenders are required by the government to obtain FICO scores and three credit reports to make most loans.
“It is troubling that these providers have the audacity to use their oligopoly powers to raise prices at many times the pace of inflation during this time of constrained housing affordability.”
He questioned the reasoning behind the price hikes, particularly in a tight housing market where affordability is already a concern.
“While FICO and the credit reporting agencies are private companies free to set their prices as they wish, their flawed or mostly opaque reasoning for raising prices on a long-established product is unacceptable,” he stated. “Furthermore, justifying the price increases by focusing on total closing costs is not the right approach.”
Broeksmit also pointed out that lenders are often left absorbing these fees in cases where a credit report is pulled but a loan isn’t closed. He urged federal agencies, including housing regulators, the Consumer Financial Protection Bureau, and the Federal Trade Commission, to examine how government-required credit reporting practices may contribute to rising consumer costs.
Read next: FHFA seeks input on FICO credit score model transition
“When the government mandates the use of specific providers, those providers should act responsibly and with transparency,” he added. “Consumers deserve a fair and transparent process, which is why we renew our call for federal housing regulators, as well as the Consumer Financial Protection Bureau and the Federal Trade Commission, to examine the role the government’s requirements play in driving up these consumer credit transaction costs.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
