Credit Bureau Stocks Fall on Report of New Two-Report Mortgage Rule from FHFA

Shares of major U.S. credit-reporting agencies and Fair Isaac Corp. (FICO) fell sharply in premarket trading Friday following reports that their federal regulator plans to reduce the number of credit reports required for mortgages backed by Fannie Mae and Freddie Mac. The potential move from requiring three credit bureau reports to just two would directly impact a key revenue stream for the industry.

FHFA Considers 'Bi-Merge' Requirement

The Federal Housing Finance Agency (FHFA) is planning to require lenders to use credit data from only two of the three national credit bureaus, a framework known as a "bi-merge," according to a report from Bloomberg News. Currently, lenders must pull reports from all three—Equifax, Experian, and TransUnion—for loans sold to the government-sponsored enterprises (GSEs).

An official announcement could come as early as Monday at the Mortgage Bankers Association annual conference, with the requirement potentially taking effect one to three months later, the report said. In a social media post on Thursday, FHFA Director Bill Pulte stated, "Equifax, Experian, and TransUnion have been overcharging Americans for far too long. This will end soon. We are seriously considering bi-merge."

Market Reaction and Impact

The news prompted a significant sell-off in the sector ahead of the market open. According to premarket data from Investing.com:

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• Fair Isaac (FICO) was indicated down 6.9%.
• Equifax (EFX) was indicated down 3.4%.
• TransUnion (TRU) was indicated down 2.4%.

The potential rule change represents a direct threat to the revenue of the credit bureaus, whose income from mortgage originations depends on the number of reports lenders are required to purchase. Both Equifax and TransUnion were trading near their 52-week lows.

Context of Broader Regulatory Pressure

This development is the latest in a series of FHFA actions that have shaken the credit-scoring industry. Earlier this week, the agency announced that Fannie Mae and Freddie Mac would treat the VantageScore 4.0 model as equivalent to the Classic FICO score, a move that caused FICO shares to collapse by roughly 20% in a single session.

The regulatory cascade has prompted analysts to reassess the sector. Bank of America recently cut its rating on Fair Isaac to Neutral from Buy and lowered its price target to $700, citing the changes. Analysts at TD Cowen noted that risk to FICO may be limited as long as the mortgage-backed securities (MBS) market continues to demand the FICO score on underlying loans.