6.26.26 HMDA Data and Housing Policy; Equifax’s Justin Demola on Credit Costs;

Welcome to the Chrisman Commentary, Daily Mortgage News Podcast. I'm your host, Robbie Chrisman. Topics on today's episode include housing policy and Humda data, how buy-down mortgages have emerged as a meaningful tool for navigating today's affordability challenges, and my interview with Equifax's Justin Demola on how rising credit costs, higher borrower fallout rates, and inefficient credit poll strategies are increasing origination expenses, making it critical for lenders to manage credit usage more strategically while leveraging reforms to improve efficiency and reduce costs. Here, take a listen, do a little preview. Can you talk a little bit about the openness to work with both FICO and vantage score from a CRA perspective? I don't know if you guys aren't necessarily playing favorite, but I just want I would love to hear the thoughts on FICO or vantage from a CRA perspective.

When we look at where we were to where we're going, I think the score competition is extremely important, especially to take some of the edge and the noise off of the pricing conversations. Fanny and Freddie both have said today that vantage is a more predictable score, predictive indicator of risk. That you know, vantage is the way of the future. Not saying that's necessarily the case as we compare to FICO 10T when that comes out, and they're probably going to be comparable. But what we are seeing is we are opening the credit box per se for the thin credit borrowers and just taking cost aside as industry participants. And we are seeing that vantage is giving more credit opportunity for scorable borrowers, a significant number uh higher as opposed to classic FICO. So you look at, you know, how does the industry benefit from this? And what does a CRA do? A CRA's job is really responsible to give the lenders and the decision makers on the credit risk side enough information to make a valid decision on whether or not a borrower qualifies for a mortgage, ultimately being able to purchase a house. So what we would say is without being biased, we look at and say, today Vange just has more scorable borrowers, be able to put more people in homes. When we look at the cost savings, we know it's significant. So we're creating value in numerous different ways. Um the ability to earn additional revenue by closing more loans, putting more people in homes, as well as on the cost saving side for significantly reduced cost for a similar product.

Thanks to today's podcast sponsor, Equifax, a global data analytics and technology company which helps mortgage lenders gain the borrower and market insights they need to improve efficiency and make accurate decisions. Access differentiated consumer credit data, powerful consumer and market insights, and income and employment data from the work number. To learn more, visit Equifax.com slash business slash mortgage. We know that Congress passed a housing bill, which, if not signed within 10 days, becomes law anyway, and US presidents are known to be candid. Once again, we see the intersection of housing, lending, and politics with not only the postponement by the president of signing the bill, but also the statement of his opinion about housing, which you can find the link to that at CrispinCommentary.com. The signing, originally scheduled for Wednesday, June 24th, was called off just hours before it was set to begin. In a social media post, President Trump said he would not sign the housing package until Congress makes progress on separate election legislation, the Save America Act, which he described as a national emergency. Meanwhile, Sheila Blair, as the head of the FDIC and a central finger in the government's response to the 2008 financial crisis and who warned about the risky mortgage lending practices that precipitated it, is warning that today's crop of financial regulators are forgetting the lessons of that painful saga by weakening banks' capital buffers, which act as fortifications against unpredictable losses and are intended to ward off potential taxpayer bailouts. From FDIC to FFIEC, the Federal Financial Institutions Examination Council recently published data on 2025 mortgage lending transactions reported under the Home Mortgage Disclosure Act, or Humda, by 4,782 U.S. financial institutions. The snapshot loan level data set released contains the national Humda datasets as of June 1st, 2026. The FFIEC released several data products to serve a variety of data users, including the 2025 Snapshot National Loan Level Dataset, the Humda Dynamic National Loan Level Dataset, and aggregate and disclosure reports. The one-year national loan level dataset for 2024 and the three-year national loan level dataset for 2022 were released as well. And like I said before, you can find those links at Crispin Commentary.com. Users can use the Data Browse dataset filtering tool to download customized reports based on the updated data. U.S. Treasuries rallied for a third straight session yesterday as lower energy prices, easing inflation expectations and softer rate hikes sentiment outweighed stronger economic data. While it was revealed that the Fed's preferred inflation gauge rose to a three-year high, keeping price pressures well above the central bank's 2% target, the readings largely matched expectations, allowing markets to look past the data and focus more on falling oil prices that have improved the near-term inflation outlook. Consumer spending and personal income both exceeded forecasts. Real spending pointed to healthy underlying demand, first quarter GDP was revised higher, business investment remained firm, and jobless claims stayed at historically low levels, all of which point to continued economic strength. With all that in mind, markets still expect the Federal Reserve to remain cautious and likely deliver one additional rate hike before the end of 2026. The outstanding universe of 30-year Uniform Mortgage Backed Securities, or UMBS, has exploded since 2019, growing 141% to roughly $5.3 trillion, while 15-year issuance has remained comparatively scarce and has actually contracted since rates began rising in 2022 as refinance activity dried up. Despite representing a much smaller market, 15-year pools continue to post relatively faster prepayment speeds because their borrowers are more likely to make curtailments and prioritize mortgage repayment. The combination of shrinking supply, strong borrower quality, favorable duration characteristics, and accelerated principal return creates a diversified investment profile that can compare favorably to traditional 30-year MBS exposure, particularly in a higher rate environment where cash in hand carries a premium. For today's interview, I wanted to welcome back to the show Equifax's Justin Demola to talk about how rising credit costs, higher borrower fallout rates, and inefficient credit pull strategies are increasing origination expenses, making it critical for lenders to manage credit usage more strategically while leveraging reforms to improve efficiency and reduce costs. He recently joined Equifax as SVP, strategic accounts leader in mortgage and housing. In this role, he leads the enterprise accounts team and helps drive mortgage strategy. His over 30 years of mortgage consulting and business development experience, most recently holding the role of president of Lenders One Cooperative and SVP origination solutions for AltaSource. Let's talk credit score costs. That's everybody's favorite subject. By some measures, they've they've risen 1800% since 2020. Put another way, 63 cents to $12. Most people assume credit report costs are driven by the bureaus themselves. I would assume you're here to dispel that myth, but can you discuss what is really driving that surge?

Yeah, Robbie, and thanks for having me. When we look at the history of credit report costs, you know, over the past five or so years, the major driver of the increase is the underlying credit scores from the third parties. That has gone, as you mentioned, from 63 cents to over $12, substantially increasing the cost of credit report from where we were a couple of years ago to where we are today. And that is the true reason why credit report costs have skyrocketed, quote unquote, skyrocketed over the past uh bunch of years.

I saw that only 35% of mortgage applicants are actually closing in 2026 compared to 65% in 2020, which obviously impacts lenders' bottom lines and the auxiliary costs associated with closing loan. What does that fallout rate, nearly doubling, mean in real dollar terms for a lender? And how do these upfront credit costs compound that?

Yeah, you know, that is one of the biggest conversations that we are having with lenders, you know, with the trade organizations as well. When we look at the current structure and credit report costs, and lenders are pulling a lot more credit reports than they are closing loans. And there's plenty of opportunity for lenders to, you know, either make themselves more efficient or use products and services that we already have to offer with the additional data such as NCTUE to lower their upfront costs on loans that may fall out. You know, when we look at, you and I have had this conversation in the past, when we look at the process and the sales funnel for a loan originator, and then many conversations they're having are really about whether or not a borrower qualifies and not necessarily into the pricing section of our conversation of the transaction. So, you know, we have plenty of products and services, you know, single bureau, vantage, NCTUE data, even non-trended data to really help lenders reduce their costs. And it's scalable. They do have to change workflows, but there is a significant trade-off in cost savings.

I saw out there, lenders have a choice in how they pull reports during the shopping phase before the mandatory tri merge kicks in for final underwriting. How are the most cost-conscious lenders using that flexibility today?

Well, as of you know, just a few weeks ago, we're seeing a significant number of lenders now pulling advantage. We went from somewhere around 200 to 900. And when we look at what people are doing on the top of their sales funnel, it's really using the alternative data products, uh single bureau, really looking at how they can lower the costs for their customers throughout the process. And you know, if you look just alone at the cost savings from Vantage to the to the legacy score provider, you know, you're almost talking $35 per transaction. Even if you're coming in and you're talking to a borrower, it's have the conversation, speak to them, understand what they're doing, how they're trying to do it, use products and services that will be at a reduced cost to manufacture the loan up until the fact the timing that they need to have the tri merge. And usually that occurs around the pricing conversation. So single bureau, vantage, you know, we have the NCTUE data, you know, additional data points. We also have the ability to give some income insights, uh, work number insights into the initial credit report file for borrowers for the borrowers so the lenders can make better, more informed decisions earlier in the process. And then they can focus on the borrowers that have a higher propensity to close that would actually qualify.

Let's talk about some cost savings because I'd like to skew toward the positive here as we go through the arc of this interview. FHFA's move to adopt vantage score 4.0 is projected to save the mortgage industry and borrowers an estimated $1 billion. That's nine zeros. Where are those savings actually coming from?

Truly the delta between the cost of the legacy score versus vantage score. So, you know, you look at the aggregate number of credit pools throughout the you know, the tenure of you know, you figure the lifecycle of a year, call it, look at the number of credit repulls, look at the Humda data, and we're backing into multiplying that savings times the number of credit pools times three.

Thoughts on how score competition in general drives innovation and ultimately benefits the broader market. Obviously, mortgage lenders should figure out what criteria they want to use when evaluating which model best aligns with the risk appetite and operational workflows.

I think competition is good across the board. We have a lot of competitors, well, a handful of competitors in the marketplace, and we're all trying to create a creative value for our customers and really make our credit data file the most valuable or the most useful in the marketplace. So again, things like NCTUE, you know, Freddie just announced that last week. Um, that's exciting for us. No, that's our data. It's included in the credit file. There's no additional charge. It allows borrowers that have, again, thin credit files, positive attributes only to when you look at the credit assessment for Freddie Mac. So they're released that about two weeks ago and expecting a Q4 full launch there.

Any advice for mortgage lenders who want to improve loan conversion rates while managing the credit cost pressures you've described? And I will add the caveat of charging borrowers for credit costs up front hasn't quite gotten the legs that some of us thought it would have.

Yeah, again, I you know I have lots of thoughts and inputs on this. I've been on the origination side for 27 years. And, you know, quite frankly, when we look at you know, the credit assessment and the initial top of the sales funnel, yeah, it's important that the loan officers use the tools that they have, but also understand when it's appropriate and when it's and it's not appropriate to pull credit, what type of credit, what data they're looking at, how how often are they pulling it? You know, when we look at top of the sales funnel and look at the pool to rates, that's exasperated a little bit by multiple pulls on the same bars as well. So, you know, there's things that lenders can do. And you know, we've mentioned them previously, but it's truly just using the products and services that are currently available at a reduced cost to put them higher in your sales funnel and really understand when borrowers are ready to pull the trigger, what data is needed and how you can convert it. But again, if if all things were being equal and you look at single file with vantage, seven, eight dollars on a per borrower basis versus where we are today, you know, significantly higher with the legacy credit score costs, uh, people who are pulling tri-merges up front earlier in the process. And I think it's really a training thing more than anything. When we speak to our lenders and speak to a lot of people on a daily basis, the loan officers, they need to really work with them to say, okay, how do we understand how to evaluate the credit risk of a borrower? And it the easiest thing today is trimerge credit report. And that's what they're used to, and that's how they do it, and they run it through DU as opposed to having the conversations and saying, you know what, Robbie, you qualify for a loan. The rate will be between, you know, six and seven percent, and you can qualify for up to $250,000, $300,000, whatever the number is. And then as the borrower starts moving down that that sales funnel and gets a property under contract, then the conversations have to change and the data used probably have to change, but you can really defer a lot of that cost in terms of or expenditure or waste, whatever we're gonna call it, until a borrower has a higher propensity to close.

I'm looking at your virtual background here, and it says helping people live their financial best. Altruistically, holistically, whatever LA you want to do. Thoughts on how you feel like Equifax is helping people live their financial best.

Yeah, we're we're supplying data assets to lenders and creditors that are going to make decisions for borrowers to be able to purchase homes, purchase automobiles, get the credit card, pay for college, whatever financial instrument they need to fund whatever project they're working on, home, school, car, to get to work, whatever it is, you know, we supply those data points so people can make informed credit decisions and be able to offer solutions to borrowers.

Very well put. Justin, you know, I always appreciate the time. Thank you very much. And I'm sure we'll talk to you again soon. All right. Buy down mortgages have emerged as a meaningful tool for navigating today's affordability challenges, growing to $41.7 billion or 1.6% of the Genny May universe, as elevated home prices and higher mortgage rates continue to strain buyers. Concentrated primarily in FHA and VA lending, these loans temporarily reduce borrowers' interest rates for one to three years, but require qualification at the eventual fully indexed payment, meaning they tend to attract stronger credit borrowers with above average FICO scores. For investors, buy down loans offer attractive prepayment protection during their early years, as borrowers are less likely to refinance while benefiting from the temporary rate subsidy. However, prepayment activity typically increases once the buy down period begins to expire. As affordability pressures persist, buy down products are likely to remain a significant feature of and in the mortgage market, providing both borrowers and investors with a bridge through a higher rate environment. Today's economic calendar includes May advance international trade in goods, advanced retail inventories, advanced wholesale inventories, and final June University of Michigan consumer sentiment, which is expected to be revised higher in the final release for June, bolstered by recent weeks' drop in gasoline prices and buoyant stock markets. Inflation has exceeded wage growth for two consecutive months in several key private sector industries, and with gasoline prices still elevated and broader war-related price pressures yet to fully emerge, many households may increasingly rely on savings and debt to sustain spending. We begin Friday with agency MBS prices relatively unchanged versus yesterday's close, the two-year yielding 4.09%, and the 10-year yielding 4.38% after closing yesterday at 4.39%. Let's wrap up with a joke and some housekeeping. A businessman went to Las Vegas for the weekend and he lost almost all of his money and had only just enough for the plane ticket back home. He finds a taxi waiting outside the casino, which he gets into and proceeds to explain his predicament and that he'd send the driver the money for the fare when he got home. The driver doesn't care. Listen, pal, if you don't have twenty bucks, get the hell out of my cab. Fortunately, the businessman managed to hitch a ride to the airport and caught his flight with seconds to spare. A year later, he returns to Vegas, and this time he's in luck and wins a fortune. After claiming his winnings, he goes out in front of the casino and sees a long line of cabs. Suddenly, he recognizes the driver who refused to give him a ride the previous year at the back of the queue. After a moment of thought, he gets into the first cabin line. How much for a ride to the airport? He asks. Twenty dollars. Okay, and how much for you to pleasure me on the way? Get out of my cab, the driver snarls. The businessman goes to the second cab, asks the same question, and gets a very similar reply. He does this for every cab in the long queue until he reaches his old friend at the back. How much for a ride to the airport? Twenty bucks. Okay. And off they went. As they drove past the cabs in the long line, the businessman gave a huge smile and thumbs up sign to all the other drivers. Thanks again to Equifax, a global data analytics and technology company, which helps mortgage lenders gain the borrower and market insights they need to improve efficiency and make accurate decisions. Access differentiated consumer credit data, powerful consumer and market insights, and income and employment data from the work number. To learn more, visit Equifax.comslash business slash mortgage.