According to HousingWire, the Federal Housing Finance Agency is planning to order Fannie Mae and Freddie Mac to accept two-bureau credit reports instead of the traditional three-bureau reports that have been standard in mortgage underwriting. This shift from what's called tri-merge to bi-merge reporting would allow lenders to choose data from just two of the three major credit bureaus instead of pulling from all three. The formal announcement could come as soon as mid-October during an industry conference in Chicago.
The change represents a significant move toward reducing costs in the mortgage process. FHFA Director Bill Pulte has been vocal about his concerns that the three major credit reporting agencies have been charging excessive fees, and he's indicated this policy change is part of an effort to address that problem. He's also been exploring other alternatives to further streamline credit reporting requirements.
This isn't entirely new territory. According to HousingWire, a bi-merge option was actually considered during the previous administration, but implementation challenges caused delays back then. Now that Pulte is leading the FHFA, the agency appears ready to move forward. If approved, lenders would have roughly one to three months to prepare for the requirement once it's formally announced.
Adding to the recent momentum on credit scoring flexibility, the FHFA has also just approved the use of VantageScore alongside traditional FICO scores for GSE-backed mortgages. This expanded scoring option is expected to help more borrowers qualify for loans by giving them additional pathways to demonstrate creditworthiness.
What I am seeing locally here in the Bay Area and broader East Bay region is that any change making it easier and cheaper for lenders to process loans tends to eventually benefit both buyers and sellers. When underwriting becomes more efficient, those savings can translate into better pricing and faster closings. For borrowers who might have been on the fence about affordability in this expensive market, having more flexible credit scoring options could open doors that were previously closed.
