The Fair Issac Corp. (FICO) announced a new program expected to provide mortgage lenders and brokers immediate cost-savings and price transparency when accessing its credit scores.
The FICO Mortgage Direct License Program was designed to give tri-merge resellers the option to calculate and distribute FICO Scores directly to their customers without involving the three nationwide credit bureaus, according to a company press release.
“Today marks a turning point in how credit scores are delivered and priced across the mortgage industry,” FICO CEO Will Lansing said in the release. “Direct licensing of the FICO Score brings transparency, competition and cost-efficiency to the mortgage lending process. This change eliminates unnecessary mark-ups on the FICO Score and puts pricing model choice in the hands of those who use FICO Scores to drive mortgage decisions.”
Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit said the new program appears to have potential to address certain issues the mortgage industry has been pointing out for a long time.
“MBA has led the industry in calling for fixes to the anticompetitive market and increasing costs that lenders and consumers pay for required tri-merge credit reports and other credit reporting products,” Broeksmit said in a statement. “FICO’s new program – which enhances transparency and provides more options to lenders – is a step in the right direction.”
To increase choice and optionality for industry participants, FICO is introducing two alternate pricing models – a performance pricing model and the per-score-only model, which is currently the standard.
Under the new performance pricing model, the royalty fee for the FICO Score will be $4.95 per score – 50 percent less than the average cost per score for tri-merge resellers. This fee reduction will be achieved by eliminating credit bureau mark-ups, according to the release.
A $33 funded loan will be applied per-borrower per-score when a FICO-scored loan is closed to cover FICO Score’s downstream utility provided for mortgage insurers, the government-sponsored enterprises (GSEs), investors, rating agencies and other market participants. The funded loan fee replaces fees previously charged for re-issue of FICO Scores, enabling broad use by participants in the originating market.
“While it remains to be seen if this will result in materially lower costs, MBA will monitor the implementation of this new program while continuing to call for reforms that support a better credit reporting system that promotes more competition, efficiency, and lower costs for consumers,” Broeksmit said.
Alternatively, lenders will be able to continue using the current per-score-only pricing model, which will maintain a $10 per score fee for tri-merge resellers, which reflects the average price previously charged by credit bureaus for the FICO Score. This model is designed not to increase per-score fees for lenders.
FICO will also offer both FICO mortgage score pricing models to the three nationwide credit bureaus on the same terms, though FICO does not control any pricing mark-ups the bureaus may impose in their channels.