U.S. credit-reporting stocks fall as FHFA weighs two-bureau mortgage rule
Investing.com - Fair Isaac is indicated down 6.9% in premarket trading Friday after Bloomberg News reported the Federal Housing Finance Agency (FHFA) is planning to require lenders to use credit data from only two of the three major bureaus for mortgages sold to Fannie Mae and Freddie Mac.
Equifax, whose mortgage-pull revenue depends directly on how many bureaus GSE lenders are required to query, is indicated down 3.4% ahead of the open, while TransUnion is indicated down 2.4%. Both stocks are hovering near their 52-week lows.
Under the proposed bi-merge framework, Bloomberg reported, lenders would be permitted to choose any two of the three bureaus rather than pull data from all three. FHFA Director Bill Pulte could formally unveil the change as early as Monday at the Mortgage Bankers Association annual conference in Chicago, with the requirement expected to take effect one to three months after announcement.
Pulte signaled the shift in blunt terms on Thursday, writing on social media: "Equifax, Experian, and TransUnion have been overcharging Americans for far too long. This will end soon. We are seriously considering bi-merge, and stronger solutions (SAFER and SOUNDER). We will not allow companies to take advantage of American consumers. No more."
On Tuesday, Pulte announced via social media that Fannie Mae and Freddie Mac would move to a unified loan-level pricing adjustment grid treating VantageScore 4.0 as equivalent to Classic FICO, triggering a roughly 20% single-session collapse in FICO shares.
That followed a September 4 directive ordering all GSE lenders to begin accepting VantageScore — each step dismantling the near-monopoly FICO had held over conforming mortgage originations for three decades. FICO has now shed more than 63% year-to-date, per Investing.com data, and sits not far above its 52-week low of $586.05.
"What limits risk to FICO is the MBS market, which wants the FICO score. As long as that holds, each loan will still have a FICO score attached," TD Cowen analyst Jaret Seiberg noted, while also flagging a consistency problem in FHFA's approach, questioning why the agency now views FICO and VantageScore as equivalent "when just two weeks ago it released grids that concluded that Vantage Score overstated credit quality by about 20 points relative to FICO."
Bank of America has cut its rating on Fair Isaac to Neutral from Buy and lowered its price target to $700, citing the cascade of regulatory changes, a target that sits roughly 5% below Thursday's close of $661.75.