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Research Outline
Prepared for Peter F. | Delivered September 13, 2019
Credit Reports Sold to Mortgage Companies
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Goals
To determine how many credit reports are sold to mortgage companies each year for the purposes of estimating potential product sales.
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Early Findings
The FHA and VA offer a few refinancing options that do not require a hard credit pull. The
FHA Streamline Refinance
program does not require a full credit check for all applicants. Eligible homeowners can also use the VA's
Interest Rate Reduction Refinance Loan
(IRRRL). These were the only two programs we could find that state they do NOT require a credit check. Every other type of primary mortgage or refinancing requires a credit report.
In 2018, the
FHA
had 51,000 of the Streamlined Refinance mortgages (out of a total of
1,014,609
). These would be mortgages that would NOT involve a hard credit pull. It is possible some of these did involve a credit report, but for assumptive purposes, this is one amount we can exclude from our total market size triangulation for all credit reports sold to mortgage companies.
The VA declares it underwrote
610,512
total mortgages in 2018,
67,347
of which were
I
R
R
R
L
s
which would not require a hard credit pull.
E
x
p
e
r
i
a
n
's annual
report
does not declare how many credit reports it has sold in the US (nor a breakdown of those sold for mortgage vs. other purposes).
E
q
u
i
f
a
x
's annual
report
states their mortgage sector made $153.6 million.
E
q
u
i
f
a
x
will pull all 3 credit bureau's scores
themselves
for the relevant clients, so again we cannot simply divide this figure by the average cost of 1 credit report. The mortgage services segment also involve monitoring and alert services for business clients. The annual report does not detail how many consumer reports were sold to mortgage companies.
T
h
e
third US credit bureau,
TransUnion
, only reports its overall financial services vertical. This segment made $766 million in 2018, but it includes a wide variety of services, "
across every aspect
of the lending
l
i
f
e
c
y
c
l
e
; customer acquisition and engagement, fraud and ID management, retention and recovery. Our products are focused on mitigating risk and include credit reporting, credit marketing,
a
n
a
l
y
t
i
c
s
and consulting, identity verification and authentication and debt recovery solutions." Therefore, again, this figure cannot be used to calculate the number of consumer credit reports sold to mortgage companies without further information.
TransUnion
does mention this for credit reports: ": For 2018, financial services revenue increased $145.1 million due primarily to a 13.8% increase in credit report unit volume, an increase of 6.0% from our recent acquisitions, and an increase from new product initiatives, partially offset by a decrease in the average price per credit report due to a change in the mix of customer volumes. Credit report unit volume increased in 2018 despite softness in the mortgage market, including refinance volume, particularly in the fourth quarter of 2018, which was more than offset by an increase in volume in consumer lending."
Every source we could find states that "most" lenders check credit scores twice when closing a mortgage.
The Consumer Financial Protection Bureau reports
10.3 million
close-ended mortgage applications with
6.4 million
o
r
i
g
i
n
a
t
i
o
n
s
.
If we speculate that applications that did not result in a loan only involved 1 credit report pull (since mortgage lenders usually pull for the second time on the day before or of closing). That is
(
10,300,000 = 6,400,000 = 3,900,000 credit pulls x 3 bureaus = 11,700,000. Then we need to remove the special refinancing mortgages that do NOT require a credit pull 6,400,
0
0
0
-
5
1
,
0
0
0
-
6
7
,347 = 6,281,653 closed mortgages that would usual require two credit pulls. 6,281,653 x 3 credit bureaus x 2 pulls during the application = 37,689,918 credit reports.
11,700,000 credit reports from unfinished mortgage applications + 37,689,918 credit reports from completed mortgage (including refinancing) applications = 49,389,918 total credit reports sold to mortgage companies in the US.
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