How a New Mortgage Rule Change Could Raise Interest Rates and Cost Homebuyers Thousands

The following article is sponsored by the Bull Moose Project and was written by its Founder and President Aiden Buzzetti.

Homebuyers could save a few dollars upfront – only to pay more than $20,000 over the life of their mortgage. That is not affordability. It is a mortgage change that could raise costs for families at the exact moment President Trump is focused on making homeownership more attainable.

Buried inside the mountain of paperwork that comes with buying a home is a small credit-reporting cost most Americans have never heard of. It is called a tri-merge report, and it requires lenders to pull credit data from all three major credit bureaus before approving a mortgage.

Now, mortgage lenders want to weaken that standard. Instead of pulling all three reports, they want to switch to a bi-merge system that uses only two. That may sound like a minor paperwork change. It is not.

Mortgages are priced on risk. If lenders and investors have a less complete picture of a borrower’s credit history, they can demand higher interest rates or fees to account for that uncertainty. That is the danger of bi-merge. It may shave a few dollars off the upfront cost of a credit report, but it can make the mortgage itself more expensive for the family buying the home.

Research from the American Enterprise Institute shows that even a tiny rate increase can cost borrowers real money. On a $400,000 mortgage, a one-basis-point increase adds roughly $1,000 over 30 years. A quarter-point increase can add more than $20,000 over the life of the loan. Meanwhile, a traditional tri-merge report typically costs around $80 to $100, while a bi-merge report would reduce direct data costs by roughly one-third. In plain English: borrowers might save about $30 today, only to risk paying thousands more later.

That debate is moving quickly. Bloomberg recently reported that the Federal Housing Finance Agency (FHFA) plans to direct Fannie Mae and Freddie Mac to move from a tri-merge to a bi-merge requirement. The change could be announced by FHFA Director Bill Pulte as soon as October 12, when he is scheduled to speak at the Mortgage Bankers Association’s annual conference.

As FHFA weighs its next step, it should make sure an effort intended to save borrowers money does not expose them to much higher costs and undermine President Trump’s housing affordability efforts.

The tri-merge model provides borrowers a better chance of having their full financial record seen. Credit information can appear at different times across the three bureaus. One file may include an account, a payment, or an error that another file does not. Pulling all three reports helps ensure a lender is not basing the biggest financial decision of a family’s life on an incomplete snapshot.

That matters most for first-time buyers, younger Americans, and families with thinner credit histories. Their records are more likely to be incomplete or uneven across bureaus. One missing rent payment, utility record, or account can be the difference between qualifying and being declined, or between an affordable rate and years of higher payments.

Voters understand the risk. A national survey of more than 1,200 voters conducted by McLaughlin & Associates found that two-thirds support requiring lenders to pull all three reports, including 71 percent of Republicans, 62 percent of Independents, and 59 percent of Democrats. It is common sense: when a family is taking on a mortgage that may last 30 years, less information is not better information.

The poll also exposes how misplaced the industry’s argument about affordability is. Sixty percent of voters are dissatisfied with housing affordability, but only ten percent identify closing costs as a meaningful hurdle, and just three percent are concerned about the cost of a tri-merge report. Families are worried about home prices, property taxes, and mortgage rates, not the small upfront cost that sets them up for affordable financing.

Saving $30 and risking $5,000 is not affordable. It is mortgage lenders profiting from homebuyers for decades by charging higher interest rates. That doesn’t sound like President Trump’s housing affordability agenda.