FICO has announced a major shift in the delivery of FICO Scores to the mortgage industry with the launch of the FICO Mortgage Direct License Program.
With the release of the new product, tri-merge resellers will have the option to calculate and distribute FICO Scores directly to their customers, eliminating reliance on the three nationwide credit bureaus. According to FICO, this shift will drive price transparency and immediate cost savings to mortgage lenders, mortgage brokers, and other industry participants. Firms 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,” said 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.”
To increase choice and optionality for industry participants, FICO is introducing two alternate pricing models. FICO’s new performance model is built on successful mortgage funding and reflects the FICO Score’s role in enabling mortgage liquidity and reducing lender costs.
Under the new performance model, the royalty fee for the FICO score will be $4.95 per score, marking a 50% reduction in average per score fees into the tri-merge resellers, a reduction achieved by eliminating credit bureau mark-ups. A funded loan fee of $33 per borrower per score will apply when a FICO-scored loan is closed, recognizing the FICO Score’s downstream utility for mortgage insurers, GSEs, investors, rating agencies, and other market participants. The funded loan fee replaces fees previously charged for re-issue of FICO Scores, enabling broad use by participants in the originating market.
Investor’s Business Daily reported that the news by FICO sent its stock shares upward Thursday after they said its predictive FICO credit scores would be made available directly to the credit report vendors.
Lenders may also opt to continue using the current per score only pricing model, which maintains a $10 per score fee into the tri-merge resellers, the average price previously charged by credit bureaus for the FICO Score. This model is designed to represent no increase in per score fees for lenders.
The FICO direct license program empowers tri-merge resellers to optimize credit costs for both lenders and borrowers. By streamlining distribution, the direct license program enhances cost transparency and reduces the price of FICO Scores to the mortgage industry.
FICO’s new model was praised by Federal Housing Finance Agency (FHFA) Director William Pulte via social media: “I’ve recently had productive conversations with FICO CEO, Will Lansing, and his Representatives. I GENUINELY appreciate FICO taking Constructive Criticism, which was given in the spirit of ensuring a competitive and safe and sound market, to then generate Creative Solutions to help the American consumer. While their decision is a first step, it is appreciated. I encourage the Credit Bureau’s to also take similar creative and constructive actions to make our markets safer, stronger, and more competitive. To that end, ‘Vantage Score’ should also look at ensuring they are competitive, in every way, including but not limited to costs. Thank you to all who are helping make the Market more competitive, and safer and sounder, for the benefit of the American People!”
FICO will also offer both FICO mortgage score pricing models to the three nationwide credit bureaus on the same terms, though FICO does not control any pricing mark-ups the bureaus may impose in their channels.
Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit, CMB, added: “MBA has led the industry in calling for fixes to the anticompetitive market and increasing costs that lenders and consumers pay for required tri-merge credit reports and other credit reporting products. FICO’s new program—which enhances transparency and provides more options to lenders—is a step in the right direction.”
