Originations on the rise, but so are credit report fees
The year is young, yet contradictions inherent to a volatile market loom large: Credit report costs are up at the same time that originations are.
In his monthly “3 Points” presentation to brokers released this week, United Wholesale Mortgage CEO/president Mat Ishbia (pictured) wondered aloud on the impact each increase will have in 2024. He first debated if federal regulators might get involved to mitigate the soaring costs of credit reports.
“Credit report fees have gone up significantly, and it’s consistently happening,” Ishbia said. “It’s hurting consumers across the industry, changing the way the mortgage business is going where people are now having to collect money up front for credit reports. And the money is outrageous now from where it used to be.”
Will regulators step in to curb credit report fees?
Ishbia noted the Federal Housing Finance Agency (FHFA) had once voiced concern over rising credit report costs and signaled it may step in to mitigate further increases. The FHFA was established in the aftermath of the Great Recession for the effective supervision, regulation and housing mission oversight of Fannie Mae, Freddie Mac and the Federal Home Loan Bank System.
“What is the FHFA going to do about it?” Ishbia asked. “They pushed to reform credit reports. However, since they announced it, it’s gone up astronomically. What are they going to do to stop it? Consumers are being hurt; mortgage lenders are being hurt. Everybody’s being hurt except for the credit companies.”
It’s also gumming up the system, he added: “It’s affecting how things are done in the mortgage process, making the process not as fast, not as easy and definitely not as cheap.”
He likened the situation to having to patronize the local grocer – the only store in town, as it were. ‘It’s completely arbitrary,” he said of rising fees on credit reports. “It’s almost like working for a retail company. You can only use their price that they give you and you kind of deal with it.”
“It’s just gone up astronomically,” Ishbia said. “It’s interesting to see how it’s going to shake out in ’24, ’25 and beyond.”
Bolstered originations will emerge in 2024
On a more welcome front related to increases, Ishbia described a landscape of growing originations in 2024.
“We’ve talked about the Federal Reserve announcing it won’t be increasing rates, that’s one thing. But I said even a couple of months ago that we expect – the market expects – purchase to be up regardless of if rates went down. And now with rates going down, purchase is going to be up even more.”
How much more? “We thought 10%,” Ishbia said. “But now we’ll say it can be up to 18%, 20%, 25% purchase because people are going to sell their houses, people are going to be moving. People who are on the fence are going to jump off the fence.”
With a bolstered purchase market, Ishbia noted, opportunities to refinance will emerge as well. “Then, of course, refis are coming back. If you keep doing the same amount of purchases, refis are going to be there as well.”
Essentially, Ishbia inferred, happy days are here again: “We went through two tough years,” he said. “2022 and 2023 were tough years for the industry, and 2024 is going to come back hopefully strong and positive. A lot of chief economists are saying we’re going to be in the low 6s, high 5s. This is going to happen. Are you prepared for it? Originations are going up in 2024. Get ready, be prepared and be ready to dominate.”
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