- 6 weeks ago
Three industry leaders from each of the bureaus come together and the message is unmistakable: the future of mortgage lending depends on an inclusive, data-rich approach to credit qualification. HousingWire’s Clayton Collings moderates a conversation with Joel Rickman of Equifax, Michele Bodda of Experian, and Satyan Merchan from TransUnion to pull back the curtain on one of the industry’s hottest topics: credit. This executive panel delves into how the talk around moving from tri-merge to bi-merge and the associated data reduction is shortsided, risky and misaligned with consumer needs. Lenders choosing to start with all three reports aren’t just checking a box, they’re eliminating surprises that cost borrowers time, money and trust.
As credit files expand with new sources, alternative data, and more contributors than ever, the panel outlines how industry-wide collaboration is strengthening credit access and transforming the mortgage process. This conversation gets straight to the point: more dvata leads to better decisions, more qualified borrowers and a stronger housing finance system.
As credit files expand with new sources, alternative data, and more contributors than ever, the panel outlines how industry-wide collaboration is strengthening credit access and transforming the mortgage process. This conversation gets straight to the point: more dvata leads to better decisions, more qualified borrowers and a stronger housing finance system.
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NewsTranscript
00:00Hi, I'm Clinton Collins, the CEO at HousingWire, and we are here for a pretty legendary conversation.
00:12This may be the first time, at least my first time, bringing together leaders from the three
00:17nationwide consumer reporting agencies to talk about what's changing in data in the mortgage
00:22process. Joel, Michelle, Satyan, thank you so much for joining us today. So, Joel, I want to kick off
00:28with you with kind of your view on why data is so important in today's mortgage ecosystem and how
00:36you're thinking about the landscape that is just the talk of the town. Well, first, I want to say
00:41very much, thank you so much, Satyan and Michelle, for joining us. I think it's important for everybody
00:47to know we are vicious competitors. I mean, outside of this time right here, we're going to fight to
00:52earn our business with each and every customer. And we all come to the table with our unique offerings
00:58and our unique differentiators. So that's the first thing I want people to realize. But more
01:03important, all of us are here today because we actually stand united that more data is better
01:09for the consumer. And that starts with all three credit reports. And then that expands out on all
01:15the differentiated things that all three of our organizations are doing to bring to the industry
01:20with the single objective of how do we help more people qualify for the loan? That's what it's really
01:24about where there's so much conversation about how do we reduce data. That's how you eliminate
01:29people. We're looking at an inclusive approach of how do we get more people qualified today? So
01:34I think we all share that. And the fact that we're all sitting here together is representative
01:38of that united goal. Michelle, do you feel the same way? Vicious competitors?
01:41Well, yeah, I can agree more. All day, every day. And I totally agree. Also, our mission is financial
01:51inclusion for all. And so we spend all day, every day, not just competing with these guys, but also
01:56working really hard to make sure that we can fairly represent all consumers and give everybody the
02:01chance to homeownership if that's what they want. All right. So on the topic of vicious competition,
02:05it's been disclosed by each of you that there are major differences between your credit files and the
02:10data you report. I think one important fact when it comes to the three national bureaus is we don't
02:18see each other's file, which makes that an even harder competitive landscape, right? I cannot inspect
02:25Michelle's file or Joel's file. So I really have to work with my teams to do what we think is the best
02:30thing to add to our bureau data. And it's something that, you know, for those that aren't aware, we have,
02:37you know, I can speak to myself, you know, me and my team are the face of the mortgage business and
02:42also the auto business. But we have large amounts of people whose job is every day, day in and day out
02:48to source more information, more data on the file. And one thing I want to add here is
02:53the file is just becoming more and more diverse. Like we can talk about this a little bit more,
02:59but there are so many new, different, unique financial lending products that I think the world right
03:06now is as, as differentiated as a file as we've ever seen.
03:09What's an example of like these, the new data capabilities or features of the file?
03:14Sure. So for one example would be the buy now, pay later lending product. So the affirms of the world,
03:20we work through CDI and industry organizations to, to talk about how, how to get something standard on
03:26that, on the file. But at the same time, it's really up to the furnishers to decide when,
03:32how much and to whom they furnish. And so again, we compete very ferociously about getting those
03:38difference, getting as much data as we can on our reports.
03:41The goal is to give as much representation to consumers as we can. And so whether that's through
03:46rental payment history, whether it's through how consumers manage their cash flow, whether it's
03:52through alternative financial services, whether they be short term loans or things like buy now,
03:58pay later, like Satyan was just talking about, it's, I agree, like the files are more diverse
04:03now, probably than they've ever been.
04:05I think about it from overall contributors. If you think about five, 10 years ago,
04:10the number of people contributing data to a credit file that day has gone up three X.
04:15And it's all of the things that my peers here are talking about. It's different type of contributors.
04:21And so you have not only the difference in financial contributors, but then you also have
04:26the additional data around, are they paying rent, like Michelle said, or do they have utility
04:31information that we can add? Because the new scores will take that into account and help
04:35improve that look of the customer. And it all comes down to the data, you know, without the
04:39data, you don't have a score. And without a score, you don't go anywhere in the process.
04:43You know, jump in and say, you know, I can speak for TransUnion. I think this with all
04:48the bureaus is, is it's, it's Michelle's comment earlier. It's about getting access to credit,
04:53access to homes. You know, TransUnion works a lot on, on that consumer education, free credit
05:00scores, download our app, right. To be able to, to really understand what a consumer can
05:05do to change and what changes they can make to, to make themselves mortgage eligible. Right.
05:11And so there's a lot of education there that consumers do need to continue to build on.
05:18And again, with this proliferation of different products that you think about a younger generation
05:22and maybe their first experience with credit is, you know, in a firm loan, right. To understand
05:28what does that mean? What does that mean to go apply for a credit card? There's a, there's
05:32a lot of education that consumers need, but at the end of the day, the credit score and mortgages
05:36is, as I just think of that as like the doorknob to get in, it's just the front door. It's
05:41actually the data that we've been talking about that is used for the underwriting. The
05:45GSEs don't actually use a score in their underwriting. All they use is the data and
05:49the trended data that was pioneered about a decade ago, right. Which is much more data
05:53that's used in the traditional score today. So it's all about that data that's in the
05:57score. And again, the data is different across the bureaus.
06:00It's not just the underlying data. It's the innovation in the technology, in the security,
06:05in the consumer support and how we answer questions for consumers, how we educate consumers,
06:10the tools that we give them, the places that we go to be able to communicate with them in a way
06:14that's meaningful. It feels like more data is always something that, that people want. But one
06:20of the trends and the talking points I hear is the potential move from tri-merge to a buy merge,
06:25or even situations where a single report could be the solution for lenders. That's kind of a move away,
06:31the move to, to less data. I have a feeling that's something lenders are pretty curious about.
06:36I think it's a very slippery slope. And so I'll actually start in non-mortgage. There's a lot of
06:41big lenders in today's world that pull three credit files or two credit files in the auto space or even
06:47the credit card space because they believe that there's differences. And they want to see those
06:52differences because they believe it gives them a competitive edge in making better decisions and
06:57pricing their products more aggressively. So that is someone that has total choice. They could go with
07:02no credit score, no credit file, and they're choosing to buy three. And we're seeing that
07:07more and more in the industry. When it comes to mortgage, it really comes to the lost applications.
07:13The whole drive is an economic drive. If we're talking about what is the best way to get consumers
07:19into homes and to qualify more consumers, it is more data. And I haven't heard anybody really give a
07:25solid argument as why that's not true. All of the arguments I've heard have been very much
07:29financially based, which I respect. And I think that all of us are working together with the
07:33different options to say, how do we help upfront on the shopping behavior to control costs a little
07:41bit more. But we maintain that very proven safety and soundness on the back end so that the consumer
07:48gets the best price possible and that the American taxpayer is backing good quality loans.
07:54And it's all ties back to for a score that scores more people that that takes account for all of
07:59this data that we just talked about. And so we I think all of us understand that that kind of
08:05financial conversation. One of the things and again, this came up as well yesterday from Stan from
08:11Freedom Mortgage that he made a great point of the US housing system is truly the envy of the world,
08:17right? It's, it's a it's kind of a remarkable way to match capital with people looking to buy a home and
08:23getting to a home in a very efficient and a very safe way, right in a safe way to get people now,
08:29what is, you know, the average mortgage is well over $400,000, you're getting up to million dollar
08:34mortgages, you know, to pay maybe 10 $15 more for credit data to keep that system going seems like,
08:41like it's worth it. Yeah, I would like to comment though building on this in today's world,
08:46the lender has the ability the choice to have one credit bureau to bring that in and to start the
08:51underwriting process. They're not required to have all three till later in the process.
08:56But what we see from many lenders is they've had that bad experience for a borrower that they got
09:02closer to close, got the other credit scores, and they had to go back to that borrower and change the
09:06rate. And that's a bad experience for the borrower. It's a bad experience for the lender.
09:11And that sometimes results in a lost loan. So we see people voluntarily saying as soon as I know somebody
09:16qualifies and they show me any sign I'm going to move forward, they want to make sure they have
09:20all three credit bureaus. And that is because the loss of a loan is so much detrimental compared to
09:27the cost of getting data to do the loan right. And it also reiterates that they know there's enough
09:32variation between our different credit bureaus that it's going, it has a high potential of changing when
09:38it goes to that final pricing sheet. And so there's a choice today, there's options today,
09:44and we see people choosing with their pocketbook to buy more data sooner to make sure that the
09:49experience for their customer is that that lender closes that mode.
09:53I would say one thing maybe adding on to what Joel said is that the consumer experience is really
09:59important on the consumer having that certainty. And again, getting credit for all of what they've done
10:05in their credit file or in their relationship to credit. There's been conversations about other
10:10other lending lines. Again, Joel said very rightfully so that in other lending lines,
10:14multiple reports are used. Also, those are those lending lines that consume this alternative data
10:19way more than mortgage does. So it's good to see mortgage moving in that direction. But my point here
10:24is that typically a borrower and even their broker or their loan officer may not know exactly right up front
10:31which loan product is best for them. It could be a GSE loan, it could be a non-QM loan,
10:37it could be a VA loan, right? And I think again, to be able to cast the net as widely as possible to
10:43get the consumer in the right product, taking a look at all three bureaus and really using a trended
10:49score like vantage scores probably is the best answer to get the best option from the consumer.
10:53That's right. The other piece I would put on that around the three bureaus and that is
10:58if we go to one, eventually, like in any area, the models are going to change a little bit. So if you
11:06know that the broker is picking the highest score or you believe that and you're seeing a 730, you
11:13probably eventually will see some of the pricing price that more like a 710 or a 705 because they
11:20have to take into account what they're not seeing. So the absence of data punishes the consumer from a
11:26pricing perspective and I think that's one of the risks that we really haven't contemplated.
11:32But I will tell you if you listen to enough of the panels and there's been a lot of them in the
11:35last six months on this topic, a lot of our leading lenders are out there sharing that information.
11:41They truly want to get the best loan for the customer and so there's a decent chance they're
11:45still going to buy all three bureaus. It's just they're going to put the best one forward so then
11:49the overall ecosystem will have to adapt somewhat to that approach. Michelle, can you kick us off with
11:55one of the biggest misperceptions that you're you're hearing here at NBA Annual or you hear
11:59from clients interactions that you'd like to set the record straight on or bring clarity to?
12:05I mean I think Joel started off this session with the biggest one which is that the bureaus
12:09don't compete or that there's not innovation happening within data or the credit bureau industry
12:17because like we said mortgage is the only space that requires three bureaus to be pulled. We've been
12:24competing on that underlying data for decades innovating building on top of it trying to
12:30represent the consumer as completely as we can and so for me that's the biggest misperception I keep
12:36hearing over and over again at this conference. I think you hit you guys hit the main ones on the
12:41point. I did hear an individual stated that three credit bureaus is not good for the consumer and I don't
12:48believe that in any way. I think that is a misconception and I think that's the spirit of the
12:52conversation that more data is better. What do you think that that person's perception was?
12:58I think it was purely financial. Financial pricing. Maybe we can save 30 or 40 dollars on that closed
13:03loan which all of us know is such a small drop. I mean it's less than you know a percent percent and
13:09a half of the total closing cost. To secure a loan in the most sound housing market in the world
13:15seems a little ludicrous at times that we're spending this much energy talking about it
13:19but I'm glad we are. I think you know you started this conversation talking a little bit about
13:24education and how are we doing that. It's what's become really obvious in the last couple of months
13:29is the vast need for education not only for the consumer but even our customers. Yeah so on the
13:35customers and this is going to be the the actual last question but as we approach a period with with
13:41lender choice and and vantage score what do lenders need to do to get prepared and what moves they need to
13:47be making today to prepare for 2026. That seems to be like the head scratcher I do here pretty often.
13:54Michelle please take us off and I mean I think I think separately all three of us have come to the
13:59table and said please we will give you vantage for right now so that you can evaluate it in actual
14:06underwriting decisions and know how it will play out in your portfolio and in the real decisions you're
14:11making over time. The GSCs are going to come out with their guidelines for it here soon and then
14:17you'll know how you could make decisions using it. Take take take the score. As Michelle said we've all
14:23made it available. I know that Fannie is starting to add it on the back end in the MBS pretty soon here
14:30so I just think eyes on the score start to develop that Rosetta Stone with it an alternative to the score
14:35that's been in market for 30 years. And I would just wrap up um I think they've hit it on the nose
14:41so I would I want to wrap up by saying thank you Clayton for helping make this happen. I'm just proud
14:46we had a civilized conversation with three fierce competitors. Joel, Michelle, Satyaan, thank you so much.
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