LEIF LARSON: Protect Housing Market From Biden Era Credit Policies

Investors joke that owing a bank $100,000 means the bank owns you, but owing $1 million means you own the bank because it can’t afford to let you default. Large loans pose big risks, requiring lenders to minimize exposure. A misguided, Biden-era proposal to weaken mortgage credit reporting—by allowing fewer than three credit bureau reports—threatens borrowers and the housing market. The FHFA should reject this change and uphold the tri-merge standard for responsible mortgage underwriting.

Housing loans account for as much asa third of many Americans’ budgets, making them the single largest expense for almost every borrower. Banks and other lenders want to make certain that a borrower can repay a loan before extending credit; it’s that simple.

To help protect lenders and borrowers alike, three nationwide credit bureaus track the creditworthiness of potential borrowers. That’s been the gold standard supporting mortgage underwriting. Together, these three companies provide lenders with the most complete and consistent view of consumer credit risk, allowing for more accurate and reliable lending decisions.

Housing finance relies on credit systems that are largely invisible to consumers until they arrive at closing. Yet these systems are essential, helping lenders promote mortgage access and affordability. For first-time homebuyers, credit decisions can determine whether a family qualifies for a mortgage and how much it will pay each month.

In most cases today, lenders pull credit reports from all three companies, review them, and use that basis to assess creditworthiness. The tri-merge model isn’t perfect: bad loans still happen. But it helps catch many potential risks before the papers are signed.

That carefully balanced system may now be at risk.

A few years ago, the Biden Administration’s Federal Housing Finance Agency (FHFA