Dont cut corners to ease the cost of mortgage lending

Published: Monday, June 15, 2026 at 1:21 pm

Mortgage Lending Faces Potential Rule Change with Risky Cost-Cutting Proposal

A proposal to reduce the number of credit reports lenders must review for mortgage applications is raising concerns among financial observers, echoing past practices that led to significant economic instability. The current standard requires lenders to examine reports from all three major credit bureaus: Equifax, Experian, and TransUnion. This comprehensive review, known as tri-merge credit reporting, is designed to provide a thorough assessment of a borrower's financial standing.

The Mortgage Bankers Association is advocating for a change to this standard, suggesting that lenders should only be required to check one or two of the credit reports. They argue that the current tri-merge system is too costly, limits competition, and is no longer necessary due to advancements in reporting capabilities. The cost of a tri-merge report is cited as a primary concern, with the association claiming it adds significantly to closing costs.

However, critics of this proposal highlight that the savings from using fewer credit reports would be minimal, amounting to perhaps $70 on closing costs that typically range from $7,000 to $10,000. More importantly, they contend that the three credit bureaus do not always gather the same information. Unique financial data, such as details from fintech loans, layaway accounts, or community bank lines of credit, may appear on only one or two of the reports. Reducing the number of reports reviewed could therefore lead to crucial information being overlooked.

Furthermore, significant discrepancies can exist between the credit scores generated by each bureau, with variations of up to 45 points being common. This variability could result in a creditworthy borrower being unfairly denied a loan or a borrower with a weaker financial profile being approved, potentially creating risks for both lenders and consumers.

An analysis by some members of the House of Representatives suggests that moving to a bi-merge system could enable an additional 1.7 million borrowers to qualify for mortgages. While this expansion of homeownership opportunities might seem appealing, critics argue that these borrowers are currently excluded for valid reasons, often related to their ability to afford homeownership. They warn that lowering lending standards to save a small amount on closing costs could place millions of Americans in a precarious financial situation.

This debate brings to mind past instances where efforts to expand homeownership through relaxed lending standards had severe consequences. In the early 1990s, changes implemented by Fannie Mae and Freddie Mac, intended to make loans more accessible, contributed to widespread corruption and ultimately necessitated a massive government bailout of the financial sector in 2008. The current proposal is seen by some as a potential step backward, risking a repeat of such economic vulnerabilities.

The Federal Housing Administration has recently affirmed its commitment to the tri-merge credit reporting model, signaling a preference for maintaining existing standards. The ongoing discussion underscores the tension between making homeownership more accessible and ensuring the stability of the mortgage market.

BNN's Perspective:
While the desire to reduce costs and expand access to homeownership is understandable, the proposed shift away from comprehensive credit reporting risks undermining the financial stability that has been painstakingly rebuilt. The potential savings appear marginal when weighed against the significant risk of approving borrowers who may not be able to sustain homeownership, potentially leading to future economic distress. A balanced approach that prioritizes responsible lending practices over superficial cost-cutting is essential for the long-term health of the housing market and the financial well-being of consumers.

Tags: mortgage lending, credit reports, tri-merge, bi-merge, cost-cutting, Fannie Mae, Freddie Mac, financial sector, homeownership, Federal Housing Finance Agency, Mortgage Bankers Association, Equifax, Experian, TransUnion, credit scores, closing costs, financial stability, responsible lending

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