Credit reporting costs for mortgage lenders will increase by at least 20% in 2025
Mortgage lender executives expect credit reporting costs to rise at least 20% in 2025 compared to 2024. Lenders will face rising costs as they try to recover from years of financial losses and massive layoffs.
In early November, the company behind the widely used consumer credit risk assessment methodology (FICO) announced an increase in wholesale fees for mortgage loans. However, this is just one of the many credit reporting costs for lenders, who must also collect additional fees from the credit bureaus and third-party vendors that apply downstream.
Creditors said HousingWire they have yet to see price increases from credit providers as approvals from credit bureaus are expected in the coming weeks. However, when planning for 2025, many lenders are already factoring in higher credit reporting costs based on preliminary discussions with vendors.
For starters, FICO's wholesale price increase translates to an additional $1.45 per score, which equates to $4.35 per borrower and $8.70 per combined application for the industry-standard three bureau credit reports.
Michael Metz, operations manager for the Arizona-based lender VIP MortgageWith 330 sponsored loan officers in 39 active branches, most credit bureaus expect to raise prices as well.
“When all of that is added up, we're going to see an increase of about $18 to $20 per borrower,” Metz said. That adds up to the current $80 to $100 for a triple composite credit report and score package, based on FICO's estimates.
“FICO has increased by 40% this year, setting the stage for price growth. I think we'll see many take this opportunity to make similar swings. Metz said. “With the pending legislative ban, they're going to have to be conservative and secure revenue — expecting it to pass — and raise the price now to cover that revenue loss.”
in Tennessee First Community MortgageOperating with nearly 200 registered loan officers in 38 active branches, credit reporting costs are projected to increase by 22% in 2025.
“Our new rates are effective Jan. 1, and based on our discussions with our vendor, we expect costs to increase by $12 to $20 per report,” said Keith Canter, CEO of First Community Mortgage. “Right now we pay $82, so we're budgeting $100 per report for 2025. We should know the exact amount within the next two weeks.”
While the annual rate increase for 2025 appears modest compared to recent years, it represents a significant 72% increase from 2023 for First Community Mortgage.
FICO does not set a final score for customers. In 2023, the company implemented a tiered wholesale pricing structure ranging from $0.60 to $2.75 per point, which caused some lenders to increase their final costs to $0.60. , FICO reverted to a flat royalty of $3.50 per score, applying the same rate to both soft and hard loans.
Now that a wholesale rate of $4.95 for 2025 is official, HousingWire contacted three major credit bureaus—Experienced, Equifaxand TransUnion— to get information about 2025 pricing policies for mortgage lenders. However, no one provided specific details or responded to the request.
In a statement to HousingWire, a TransUnion spokesperson said, “Credit reports are one percent of the cost of buying a home, and it is ultimately the individual mortgage lender's decision to pass this minimal cost on to their customers.
We're proud of the role we play in helping homebuyers get the mortgage loan that meets their needs, and we're also proud to offer free weekly credit reports to help consumers plan their home purchase.”
To put this into perspective
Jim Wehmann, FICO's executive vice president of scoring, recently wrote that the $4.95 per-score fee is a small fraction of the cost of a triple-combined credit report and score package — about 15%. “With total average closing costs of $6,000, FICO's share of total average closing costs before royalties was about two-tenths of one percent for this new account.”
However, mortgage lender executives view these costs differently. A white paper (CHLA) noted that credit reports are often pulled multiple times during the mortgage application process because they are only valid for 120 days. Considering that house searches can drag on for months, it can add up to hundreds of dollars.
According to CHLA, loan closing costs have increased from $50 in 2022 to between $150 and $200 in 2024. When credit reports are taken into account for applications that do not lead to loan closings, the cost rises to $510-$725 per loan. Loan closing in 2024. CHLA plans to release a new estimate for 2025 in the coming weeks.
“The cost of a credit report may remain a small part of the total closing costs on a loan, but a mortgage company still has a loss from other credit reports that don't turn into a closed loan,” Metz said. “It affects mortgage company financials more, and that affects consumer prices in a world of shrinking margins.”
Phil Crescenzo Jr., branch manager based in New Jersey Nation One Mortgage Corporationsponsored by 52 loan officers in six active branches, said that total branch credit reporting costs are now $20,000 per month, more than double what it was two years ago.
“Part of that is credit ratings and updates and some verification — VOE, VOA, VOR elements — through the credit reporting process, not just the standard report,” Crescenzo said. “At some point it falls on the borrower, or the lender covers some, or they lend to them, but it's all going to come from somewhere.”
from (MBA) shows that independent mortgage banks (IMB) as a group show improved profitability in 3Q2024, with average pre-tax net profit per loan of $701 (18 bps).
However, 71% of MFIs reported profitability on both origination and servicing operations – down from 78% in the previous quarter – and a 20% increase in credit reporting costs will lower that number by 18 bps, industry analysts said.
Loan closing costs
First Community Mortgage's Canter said the increased seller costs come as IMBs try to lower the average closing cost of a loan below $10,000. His company's credit report costs 2% to 3% of the total cost of the loan. But that adds to competition, compliance and regulatory burdens, and irrational margin building, he said. “For the last two quarters, thankfully, we've been profitable.”
Leading US mortgage lenders have taken steps to support originators in navigating the challenging market environment. Located in Detroit for example, introduced its initiative in 2023 to cover the cost of credit reports for brokers closing loans through their wholesale arm, Rocket Pro TPO. The program has been extended.
“Next year, with all the growth, we're going to have to sit back and look at that,” said Mike Fawaz, executive vice president of Rocket Pro TPO. “Our decision is to continue paying credit reporting fees for our brokerage partners, as we have done for the past two years. Now we've also told our broker partners that we'll pay everything if the loan doesn't close at some point, but if the loan closes, we'll get paid for it. I don't know if we will do it next year or not.”
According to Fawaz, Rocket is continuing the program because brokers are increasingly hesitant to pull credit reports because of the cost. According to him, this approach is an investment in strengthening Rocket's brokerage network.
