Federal Housing Finance Agency Director William Pulte has brought renewed attention to a number of key issues that affect the safety and soundness of the mortgage industry, issues that could have serious consequences for millions of people trying to buy homes.
Among these is the resurrection of a Biden-era regulatory proposal that would replace the current credit system used in most mortgage applications with a riskier, less reliable model. It was set aside for good reason, and it should stay that way.
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The proposal first came about in October 2022, when the FHFA announced that it would move from the long-standing trimerge credit system to a bimerge model.
Here’s what that means: Right now, mortgage lenders use credit reports from all three major credit bureaus — Equifax, Experian, and TransUnion — to get a full picture of a borrower’s credit history. That helps ensure the process is fair, accurate, and consistent. The bimerge model would reduce that to just two credit reports.
That change may sound small, but it opens the door to real problems. With fewer data points, there’s a higher risk of missing something important, such as a reporting error or an outdated account. This can lead to consumers being denied loans they deserve or being approved for mortgages they can’t truly afford. It also creates instability for lenders, investors, and the broader housing market.
The FHFA claimed that this change would lower costs and boost innovation, but it never provided any evidence to back that up, and there has been little transparency around how this would affect borrowers. Thankfully, the proposal has been delayed several times and currently sits on the shelf. That’s where it should stay.
In May, Rep. Scott Fitzgerald (R-WI) and several House colleagues sent a letter to Pulte warning of the risks. They cited an analysis showing that under a bimerge system, over 1.7 million borrowers who wouldn’t qualify under the current trimerge system might still get approved. That might sound like increased access, but in reality, it means lenders are taking on riskier loans, and some borrowers could wind up with mortgages they can’t manage.
That’s not good for anyone. When loan decisions are based on incomplete information, errors are more likely, and so are defaults. Consumers could end up paying more in interest, and taxpayers could be left holding the bag if risky loans go bad. The current system, while not perfect, is one of the most stable parts of the mortgage process. It costs relatively little and helps ensure that people are evaluated fairly.
Pulte has said he’s committed to keeping the mortgage system safe and strong. And he’s right to explore ways to reduce costs for homebuyers, including reconsidering settlement fees such as title insurance. But weakening how we assess credit is not the way to do it.
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Buying a home is one of the biggest financial decisions most people will ever make. That process depends on proven, predictable, and trusted systems. The trimerge model has guided the mortgage industry through economic ups and downs for years. It shouldn’t be discarded for a new approach that hasn’t been tested and could do more harm than good.
Congress is sending a clear message: Don’t mess with what works. Lawmakers are right to call for the bimerge proposal to be shelved for good. Let’s stick with a credit system that protects consumers, supports lenders, and keeps the housing market on solid ground.
Ryan Ellis is the president of the Center for a Free Economy.