CHLA offers support for Pulte’s position on FICO pricing

After a statement made last week in condemning the credit-score pricing practices of Fair Isaac Corp. (FICO), Federal Housing Finance Agency (FHFA) Director Bill Pulte is now being complimented for his position by the Community Home Lenders of America (CHLA).

CHLA on Tuesday sent a letter to Pulte, saying that FICO “has a clear monopoly position in the U.S. mortgage market for credit scores, [and] has been raising prices excessively.” The organization went on to say that pricing for its credit-scoring services are not dictated by market forces but instead by “those sitting in the executive suite at Fair Isaac.”

“They, and they alone, set the price based on whatever number appeals to them. No one else has a say.”

FHFA and the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac not only require credit scores for the production of mortgages, but they specifically cite FICO in their guidelines, according to the letter. The past 30 months have seen FICO raise its credit score prices by 700%, and the company has not lost market share due to its dominant position, CHLA said.

“This harms American families already dealing with price inflation generally and difficult housing conditions in particular,” the trade group wrote. “Without some form of restraint, we expect even more credit score price hikes going forward. Something must change.”

CHLA asked Pulte to use his position to call for “the cessation of any further credit score price hikes and convening an FHFA Task Force to undertake a review of these recent cost hikes.”

The organization also called on Pulte to “find ways to hasten the arrival of a viable VantageScore platform for the conforming marketplace” while also exploring reforms that would allow more market competitors to enter the space.

CHLA also requested that FICO not be called out by name in relevant GSE documents pertaining to credit scores, and that they be referred to more generally.

The CHLA suggests that the GSEs establish new subsidiaries to measure the creditworthiness of borrowers. Once viable, these entities would be sold to the market to increase competition.

“We don’t want more government, but the challenge is that no one else has the data and analytics to stand up as a competitor,” Rob Zimmer, CHLA’s director of external affairs, said in an interview with HousingWire. “We’ve been stuck with Fair Isaac for years, holding over 90% market share.”

According to Zimmer, the GSEs possess the data and the ability to evaluate creditworthiness “in a way that no one else does,” and the regulator could sign an agreement stating that these subsidiaries will either be spun out within a certain number of years or shut down.

Last week, in a series of social media posts on X, Pulte openly lamented the state of credit-score pricing.

“After the hard work by many great Senators, including Senator Tim Scott, I am extremely disappointed to hear about the cost increases by FICO onto American consumers,” he said in one post.

FICO’s stock price reacted immediately with a drop of nearly 25%. At the end of trading on Wednesday, the share price traded at $1,619, below the levels of a week earlier.

Zimmer said that the next step would be for the CHLA to meet with Pulte to discuss the letter in more detail. But what’s really easy to do, he added, is for FHFA to convene a task force to start gathering a wide range of ideas.

“We don’t pretend to have all the answers. We just want more discussion — and we want a recognition, which he’s already providing, that the status quo can’t continue.”