Potential Mortgage Changes Could Cost Homebuyers More

Homebuyers might think they’re saving a bit of money at the outset, but they could end up paying over $20,000 more throughout their mortgage. This doesn’t really align with the goal of making homeownership more accessible, especially as President Trump emphasizes affordability in housing.

Buried in the home purchasing process is a relatively obscure cost related to credit reporting. Known as a tri-merge report, it requires lenders to check credit data from all three major credit bureaus before a mortgage is approved.

However, lenders are now advocating to ease this standard. They propose shifting from a tri-merge to a bi-merge system that would only pull data from two bureaus. At first glance, this might seem like a minor change, but it’s far more significant.

The pricing of mortgages is fundamentally about risk. If lenders have a less comprehensive view of a borrower’s credit history, they might set higher interest rates or fees to cover that uncertainty. This is precisely the concern with moving to a bi-merge system. Sure, it could save a little on the upfront cost of a credit report, but it risks increasing the overall cost of the mortgage for families.

Research from the American Enterprise Institute illustrates that even a small uptick in interest rates can translate to significant expenses for borrowers. For example, on a $400,000 mortgage, just a one-basis-point increase could lead to about $1,000 more paid over 30 years. A quarter-point rise could mean over $20,000 in added costs over the life of the loan. Traditional tri-merge reports typically run between $80 and $100, while the bi-merge option could reduce direct costs by about a third. In simpler terms, borrowers might save roughly $30 today, only to risk paying thousands down the line.

This debate is heating up quickly. A recent report indicated that the Federal Housing Finance Agency (FHFA) may instruct Fannie Mae and Freddie Mac to switch from a tri-merge to a bi-merge system. This change could be announced by FHFA Director Bill Pulte as early as October 12, coinciding with an address at the Mortgage Bankers Association’s annual gathering.

As the FHFA considers its options, it needs to ensure that efforts aimed at saving borrowers money don’t lead to significantly higher costs and compromise President Trump’s initiatives to enhance housing affordability.

The tri-merge system offers borrowers a greater likelihood of providing a complete picture of their financial history. Credit information can vary among the three bureaus, with one report possibly containing an account, a payment, or an error that isn’t present in another. Accessing all three reports helps to avoid basing such a crucial financial decision on partial information.

This is particularly important for first-time buyers, younger individuals, and families with limited credit histories. Their reports are more prone to being inconsistent or incomplete across the bureaus. Missing even a single rent payment or utility account could make the difference between approval and rejection or could heavily influence the interest rate offered.

Voters seem to grasp the potential pitfalls here. A national survey, which included around 1,200 respondents conducted by McLaughlin & Associates, found a strong majority—two-thirds—support the requirement for lenders to access all three credit reports, with 71% of Republicans, 62% of Independents, and 59% of Democrats in agreement. It’s pretty logical: when families are considering a 30-year mortgage, having less information isn’t beneficial.

The poll results also reveal flaws in the industry’s argument about affordability. While 60% of voters express dissatisfaction with housing costs, only 10% view closing costs as a significant obstacle, and just 3% are worried about the tri-merge report fees. Families are more concerned about home prices, property taxes, and mortgage interest rates than the minor upfront costs that actually help facilitate affordable financing.

Ultimately, saving $30 while risking $5,000 doesn’t equate to affordability. It seems more like lenders profiting from homebuyers by charging elevated interest rates for years. This isn’t quite in line with President Trump’s vision for making housing more affordable.