Talk about jumping the gun.
Equifax and TransUnion have stopped offering traditional credit reports, replacing them with the more expensive trended credit reports that Fannie Mae plans to start using but that other investors don't.
The move has forced mortgage lenders to pay for extra data they do not need and their investors don't require.
"The industry now has trended credit data whether you want it or not," said Stan Baldwin, chief operating officer of the credit reporting agency Informative Research, which provides merged reports from the bureaus to lenders.
The two credit bureaus stopped selling the traditional reports earlier this month, well before the Sept. 24 implementation date that Fannie Mae has set to begin using trended data in its new Desktop Underwriter 10.0.
"There won't be an option to get the old version, but the old data's still there — it's just that the trended data is added," said Susan Chana, a senior director of public relations at Equifax.
While a traditional credit report provides a "snapshot" of how borrowers have been using credit instruments like cards and auto loans, trended data shows how consumers have utilized these credit trade lines going back 24 months in Equifax's case and 30 months in TransUnion's.
Equifax does charge a slightly higher price that varies by user for the trended data, Chana said. Both bureaus had expected to charge more for the expanded information.
Lenders and credit resellers like Baldwin said they understand the need for trended data, but they wonder why they, and ultimately their borrowers, must buy trended data when it's not required, like when they are selling a loan to Freddie Mac or originating government-insured products.
"We can't parse out, 'This is going to be a Fannie Mae DU loan.' So for every FHA, VA, USDA and Freddie Mac loan, the consumer has to pay the slightly higher price. It's $3 more," said Catherine Blocker, an executive vice president at Guild Mortgage in San Diego. "So from a practicality standpoint, we end up having to pay for the trended credit data."
"It's frustrating to pay for it for many loans that don't require it," she added.
Aside from Fannie's upcoming requirement, trended data provide more value to lenders in underwriting or other risk assessments of their own loans, according to TransUnion.
"Trended data can not only significantly improve lenders' ability to predict risk, but can also positively impact vast numbers of consumers in the housing market through better pricing and access to mortgage loans," Joe Mellman, vice president and mortgage business leader at TransUnion, said in an email.
The data can be used to distinguish between borrowers who are "transactors" and tend to pay off their debt, or at least more than the minimum due, and "revolvers," who maintain higher balances. The ability to make that distinction could benefit transactors as it suggests they are more likely to repay their loans.
Yet it could also result in more denials for individual revolvers, even though Fannie had said it doesn't expect overall loan eligibility to change much.
"Down the road, as we start seeing DU findings that incorporate this data, we may get a loan that was an 'approve eligible' and now it's a 'refer' because of trended credit data, possibly," Blocker said. "Basically that's a denial."