Addressing housing costs is — and should be— a priority for the Trump administration, and there is no shortage of opinions in the housing ecosphere on how to make home ownership more affordable. What won’t move the needle even a micron are misguided policies based on the idea that a single company is causing all of our housing woes.
A recent op-ed absurdly claimed that “for many Americans, [home ownership] may be a dream deferred or derailed altogether due to just one factor: Fair Isaacs Corporation.”
Topping out at a cost of less than $15 for a mortgage origination, FICO’s score represents “less than two tenths of one percent” of the average closing cost for a home mortgage. In fact, there is no single component of closing costs that costs less. To allege that FICO stands as a bar to home ownership is akin to saying the cost of pens and paper is a bar to attending college.
Disappointingly, the current Federal Housing Finance Agency Director, Bill Pulte, has adopted a similar position. At a time when America needs certainty and stability to pull out of its worst housing crunch in 40 years, Pulte has been spreading misinformation that serves neither the president nor consumers.
In contravention of the Trump administration’s efforts to undo anti-consumer Biden administration policies, Pulte is promoting a two-score system for Fannie Mae and Freddie Mac, embracing the crown jewel proposal of Biden’s housing policy. Pulte has declared it will allow “Americans to use their RENT to qualify for a mortgage.” For someone in his position, Pulte demonstrates a concerning lack of knowledge of what he refers to as the “Credit Score Ecosystem.”
He is behind the times. FICO score models already account for rental payments and utility bills — provided they are made available to the credit bureaus. The greatest barrier to the inclusion of rental data is that most landlords don’t report that information to credit bureaus. But Pulte offers no remedy for this.
Echoing the Biden administration, Pulte claims his policy will bring down closing costs, But like the Biden administration, he never bothers to explain how. There is a good reason for this: The policy doesn’t and won’t reduce costs. Banks having to access two separate tri-merge reports — FICO and VantageScore — will just increase costs for consumers, just as applying for two different mortgages costs more than applying for one.
Perhaps of greater concern, Pulte has been making his ill-informed pronouncements on X, fishing for — and receiving — praise through likes and re-postings. What is missing is a coherent policy prescription addressing housing on his agency’s website.
FICO scores are valued because FICO is independent. The three main credit bureaus — Equifax, Experian and TransUnion — have joined forces to create VantageScore. The unstated goal of the bureaus is to market a vertically integrated credit score, expanding their influence and control — and their profitability. Serving as both the repositories of consumer data and the score provider is an invitation for the bureaus to corner the consumer credit market. FICO, alternatively, is the sole independent check against the credit bureaus.
Pulte further fails to articulate how introducing an entirely new and unproven scoring model enhances security and stability in home lending. In the 30 years since FICO has served as the sole credit scoring model accepted by Fannie Mae and Freddie Mac, no other model has proven itself to provide any advantage or improvement over its predictive value in minimizing lending risk.
By embracing Vantage, Pulte isn’t just rushing in to “fix” what isn’t broken — he is, by definition, creating uncertainty and higher risk in mortgage lending, which is the exact opposite of the Federal Housing Finance Agency’s directive to ensure lending stability and security.
This latest barrage of X posts, heralding a misguided Biden administration policy being brought to full fruition, draws into question whether director Pulte is up to the job. As the multi-millionaire scion of a home developer, surely he knows the housing business. It is worth noting that his grandfather built PulteGroup, one of the nation’s largest home construction firms, on a home mortgage market using the proven single-score application model.
Solving the current housing crunch requires serious and possibly tough policy prescriptions, not policies that increase costs and threaten stability. What should concern everyone is whether Pulte understands and appreciates policies that minimize risk and prioritize stability and lending security.
Gerard Scimeca is chairman and general counsel for CASE, Consumer Action for a Strong Economy, a free-market oriented consumer advocacy organization he co-founded.
