Critics Surface On “Bi-Merge” Proposal. Here’s What They’re Saying

When the Federal Housing Finance Administration released proposed changes to its longstanding ‘tri-merge’ requirement in October of 2022, the announcement got relatively little attention. As designed, the change would shift the requirement for conventional mortgage lenders to provide credit reports from the three major credit bureaus – what’s known as a “tri-merge” – to only two, or what’s known as a “bi-merge.”

TransUnion noted last year that moving away from the tri-merge system could mean that FHFA will have a less accurate picture of a given consumer when they apply for a mortgage, which could have negative implications for both the individual consumer (who may get overlooked, even if they’re creditworthy) as well as the macro housing market (which may take on increased risk with less information factored in).

Recently, outside observers have taken a fresh look at the potential impact on consumers. As covered by HousingWire, that includes Members of Congress, who voiced concern at the House Financial Services Committee’s recent FHFA oversight hearing. Here’s what they’re saying:

Rep. Zach Nunn (R-IA):

“Small community banks and credit unions… often only report data to one credit reporting agency. Under the bi-merge [reporting standard], two consumers who have similar credit profiles could potentially get different-priced mortgages depending on:

1. Which two reports are pulled,

2. Which mortgage lender a [consumer chooses], and

3. Which, or how many, mortgage lenders they have access [to] depending on where they live.”

Rep. David Scott (D-GA):

“Under the current 3 credit report system, lenders have access to all available credit history information about potential borrowers.  My concern is that by removing one of the reports from a lender’s review, FHFA is potentially leaving out predictive and positive credit history out of the credit risk assessment…

I have concerns that this action could have serious implications for consumers planning to purchase a home.”

Quin Hillyer, for the Washington Examiner:

“Most analysts agree that Fannie and Freddie’s excessively risky loan behaviors were a significant cause of the horrible financial crisis of 2008. By moving from tri-merge reports to bi-merge, the FHFA will make it more likely that Fannie and Freddie, lacking relevant information, make more bad loans.”

Damon Carr, writing for the New Pittsburgh Courier:

“A tri-merge credit report not only helps a borrower by providing more credit scores, it also serves as insurance and assurance that lenders are approving loans with all pertinent information.”

Ryan Ellis, writing for Real Clear Policy:

“On the surface, it seemed benign – but in reality, requiring government-controlled Fannie Mae and Freddie Mac (which backstop most mortgages for low-income borrowers) to only use two of the three agencies may leave lots of information on lenders’ tables. This is especially true since the announcement included no objective reasons why any of the credit rating agencies should be ignored by lenders.”