TransUnion warns against single credit pull for mortgages

"A single-pull' environment creates significant risk that strong borrowers will lose access to credit while additional at-risk borrowers find themselves in a mortgage they can't afford, said Satyan Merchant, senior vice president of mortgage and automotive at TransUnion. In the long run, that creates fresh risks for investors and threatens the safety and soundness of a mortgage market with tremendous taxpayer exposure."

"According to the study, 4.4 million currently creditworthy consumers would become ineligible for a mortgage under a single-pull model due to credit report variance.. A 2023 TransUnion study found 2 million borrowers could lose eligibility under a bi-merge system. Meanwhile, about 300,000 consumers who are currently ineligible would qualify for a mortgage, potentially leading to higher default rates if those borrowers can't sustain their payments."

"Borrowers who would receive a lower credit score under a single pull than the tri-merge average would collectively pay an estimated $6.5 billion in additional interest, TransUnion said. The study also found that 31% of consumers saw at least a 10-point change in their credit score a shift especially consequential for those near the 620 threshold required for conventional loans eligible for purchase by Fannie Mae and Freddie Mac."

A single-pull credit reporting model would render 4.4 million currently creditworthy consumers ineligible for mortgages because of credit report variance. A bi-merge model could make 2 million borrowers lose eligibility, while roughly 300,000 currently ineligible consumers would become eligible, potentially raising default risk. Borrowers receiving lower scores under a single pull could pay an estimated $6.5 billion more in interest. About 31% of consumers experienced at least a 10-point score change, which is critical for those near the 620 threshold for conventional loan eligibility. Single-pull adoption could prompt insurers to raise premiums and increase market risk.

Read at www.housingwire.com