FICO, TransUnion Shares Fall on Report of New FHFA Mortgage Credit Rules

Shares of Fair Isaac Corp. (FICO) and TransUnion fell sharply in after-hours trading Thursday following a report that federal regulators are planning a major shift in credit reporting requirements for the U.S. mortgage market. FICO shares were down approximately 7%, while TransUnion declined 6%.

Proposed 'Bi-Merge' Requirement

The Federal Housing Finance Agency (FHFA) intends to direct government-sponsored enterprises Fannie Mae and Freddie Mac to require lenders to use credit reports from two major bureaus instead of the current three, according to a Bloomberg report that cited a person familiar with the matter.

This potential move away from the industry-standard "tri-merge" report could be announced by FHFA Director Bill Pulte as soon as Oct. 12 at a mortgage industry conference in Chicago, the report stated. The FHFA has not officially commented.

Context and Market Implications

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The potential change represents the latest effort by Director Pulte to lower credit-reporting and scoring costs for homebuyers. On Sept. 3, Pulte stated the agency was "seriously considering bi-merge," signaling a potential shift away from the more expensive three-bureau system.

This development adds to significant pressure on FICO's business model. The company's stock plunged nearly 49% in September, including a 27% single-day drop on Sept. 29, after the FHFA announced it would place VantageScore, FICO's primary competitor, on an equal footing for loans sold to Fannie Mae and Freddie Mac. This move undermined FICO's long-held dominance in the mortgage market.

For the credit bureaus—Equifax, Experian, and TransUnion (which jointly own VantageScore)—a move to a two-bureau requirement could reduce demand for their data services in the mortgage sector. The report suggests continued regulatory headwinds for both credit scoring and credit reporting firms.