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The mortgage change

Marketplace Staff Jan 5, 2007

KAI RYSSDAL: If you think buying a home is already costly and confusing, sad to say you should get ready for more of the same. Two of the national credit bureaus, Equifax and Experian, have quietly implemented a new fee increase. Buying a home usually works like this. You go to a mortgage broker or a bank for a loan. They pull your credit report but you’re the one that pays the fee. Now though instead of being charged for just one credit report, you could be on the hook for as many reports as it takes to approve your mortgage. Needless to say that isn’t sitting well with a whole lot of people. Terry Clemans is with the National Credit Reporting Association. Terry, how much will this fee change affect new home buyers?

TERRY CLEMANS: Well it depends on the lender you’re going through and the credit reporting agency. For the consumer it could mean as little as an additional, you know, $5 to $10 or it could mean as much as $100 or $200. It just depends on the lending process and the credit of the consumer. The biggest problem with this it is going to adversely affect consumers that are credit challenged the most. Mortgage brokers, which do, you know, about 70 percent of all the mortgages in the United States, they shop the consumer’s loan around to multiple lenders. If it’s a real problematic file they might even go to 10 or 12 lenders.

RYSSDAL: Did this come with any notice? Did we know that Experian and the others were going to do this?

CLEMANS: They never went public with this. They brought this to the reseller community. And it’s these companies that are having to take it out to the mortgage industry.

RYSSDAL: And what’s the rationale that these credit bureaus are offering for charging this fee? I mean they must have some rationale or some justification.

CLEMANS: Oh yeah, it’s the identity theft problem. They’re claiming that they’re addressing the problem of identity theft and potential data breaches by documenting everyone in the process. You know our trade association, the National Credit Reporting Association, the mortgage industry, no one has a problem with bringing more transparency to a complicated process like a mortgage transaction. We all have issues with the added cost involved.

RYSSDAL: So then what we have really is two companies in an industry getting together, shall we say, and instituting this fee and affecting an entire industry.

CLEMANS: And changing an interpretation of the law that has been in practice for nine and a half years.

RYSSDAL: So now where do we go? What happens?

CLEMANS: Well we’re here on the Hill today working with a variety of groups from the mortgage brokers, the mortgage bankers, and the concerned congressman and we’ll see. You know we’re going to address this in many facets here in Washington.

RYSSDAL: Terry Clemans is the executive director of the National Credit Reporting Association. Terry, thanks a lot for coming on.

CLEMANS: Thank you Kai.

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