FICO has upended the delivery of FICO scores by making its data directly available to lenders via the FICO Mortgage Direct License Program.
In so doing, lenders now have another option for accessing credit decisioning data, in addition to the three credit bureaus, TransUnion, Experian and Equifax, which up until now had served as resellers of FICO’s product.
In a release, FICO says it is “eliminating [lenders’] reliance on the three nationwide credit bureaus.” However it adds that lenders “that favor working through the credit bureaus can continue to do so.”
“Today marks a turning point in how credit scores are delivered and priced across the mortgage industry,” says Will Lansing, CEO of FICO. “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.”
What’s more, FICO will now sell its data using two separate pricing models. As a result, FICO is creating a new, competitive landscape for pricing, which has been an escalating issue for mortgage originators who claim that the three bureaus have been gouging them – and, as a result, borrowers – with ever-rising fees.
FICO claims this new delivery and pricing model “will drive price transparency and immediate cost savings to mortgage lenders, mortgage brokers, and other industry participants.”
In a statement, Bob Broeksmit, president and CEO of the Mortgage Bankers Association, says the new program is “a step in the right direction.”
“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 says.
In a separate statement the Community Home Lenders of America (CHLA) says it “welcomes steps like this direct licensing pricing, to create more options for consumers and lenders – so this appears to be a good first step in addressing our longstanding criticisms about FICO’s monopolistic pricing and practices.”
“However, in the long run, CHLA continues to believe that more options are needed,” the org says in its statement. “Our lenders are eager to have a second choice with the VantageScore option, and we commend FHFA Director Pulte for his prior comments that even two providers are not enough.”
“CHLA is concerned that in a head-to-head matchup, Fair Isaac might ultimately squeeze out VantageScore and the Credit Bureau model altogether,” CHLA adds. “We will closely monitor developments related to yesterday’s announcement, to ensure promised savings are real, passed through to consumers, and consistent with our long-standing calls for fair, competitive credit-score markets.”