As the year 2025 approaches, mortgage lenders are bracing themselves for a significant increase in credit reporting costs. These escalating expenses come at a time when the industry is already reeling from financial losses and layoffs, creating additional challenges for lenders.
One major factor contributing to this surge in costs is Fair Isaac Corp.’s (FICO) decision to raise its wholesale royalty for mortgage originations. The increase from $3.50 to $4.95 per score is just one piece of the puzzle, as lenders also face additional fees from credit bureaus and resellers further downstream in the process.
Here are some key points to consider regarding the anticipated rise in credit reporting costs:
- FICO’s price hike alone translates to an additional $1.45 per score, adding up to $8.70 for a joint application for a tri-bureau credit report.
- Lenders like V.I.P Mortgage and First Community Mortgage are expecting price increases from credit bureaus as well, with projections ranging from $18 to $20 per borrower in 2025.
- Despite the seemingly moderate year-over-year increase, First Community Mortgage anticipates a significant 22% jump in credit reporting costs compared to 2024.
- Credit bureaus like Experian, Equifax, and TransUnion have remained tight-lipped about their 2025 pricing policies for mortgage lenders, leaving many questions unanswered.
While the cost of credit reports might represent a small fraction of the total closing costs of a home loan, lenders are feeling the impact of these expenses. The Community Home Lenders Association (CHLA) highlights that the credit costs for closing a single loan have already surged from $50 in 2022 to as much as $200 in 2024. When factoring in unsuccessful loan applications, this figure balloons to a range of $510 to $725 per closed loan in 2024.
This financial strain on lenders like V.I.P Mortgage and Nation One Mortgage Corporation underscores the broader implications of rising credit reporting costs. Mortgage companies are grappling with thinning margins and increased financial pressure in a competitive landscape where pricing decisions directly impact consumers.
In light of these challenges, industry leaders are exploring ways to navigate the evolving market environment. Rocket Mortgage’s Fee Freedom initiative, for example, aims to support originators by covering the cost of credit reports for brokers using Rocket Pro TPO. This initiative reflects a broader commitment to strengthening partnerships and promoting financial stability in the face of mounting expenses.
As the mortgage industry prepares for a turbulent year ahead, lenders must remain vigilant in managing costs, fostering innovation, and adapting to a rapidly changing landscape. By staying proactive and collaborative, the industry can weather the storm of rising credit reporting expenses and emerge stronger than ever before.
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