Washington Should Not Risk Another Taxpayer Bailout of Bad Mortgages

The 2008 housing collapse showed what happens when mortgage risk is ignored, understated, or pushed onto someone else.

A new DC Journal op-ed by Ryan Ellis warns that Washington should not weaken one of the basic safeguards that helps lenders understand borrower risk before a mortgage is approved: tri-merge credit reporting.

Tri-merge credit reporting requires lenders to review credit reports from all three national credit bureaus when underwriting a mortgage. That full view helps lenders see payment history, outstanding debt, credit inquiries, and other information that may not appear in every bureau’s file.

Some proposals would move away from this standard in the name of reducing closing costs. However, shaving a small amount off the front end of a mortgage should not come at the expense of sound underwriting, market stability, and taxpayer protection.

Mortgage Underwriting Needs More Complete Data, Not Less

Tri-merge credit reporting exists because not every creditor reports to every credit bureau. A borrower’s credit file can look different depending on which bureau is checked, and those differences can affect whether a borrower qualifies for a mortgage, what risk that loan carries, and whether the borrower can sustain it.

The DC Journal op-ed points to research showing that among higher-risk borrowers with scores between 600 and 639, on a credit score scale that goes up to 850, 25% show a 20-point or greater difference between a single-bureau score and the tri-merge standard. That kind of gap can change underwriting decisions.

Weakening the standard could approve some borrowers for loans they cannot afford because important negative information was missed, while other qualified borrowers could be denied because a lender relied on a thinner or less favorable credit file.

Both outcomes hurt homebuyers because fewer data points do not make lending fairer or more accurate. They make it harder for lenders to measure risk, price loans properly, and protect borrowers from mortgages they may not be able to sustain.

Taxpayers Have a Stake in Sound Mortgage Standards

This issue does not stop with lenders and borrowers. Taxpayers also have a direct interest in strong mortgage underwriting.

Fannie Mae and Freddie Mac remain central to the U.S. housing finance system. The Congressional Budget Office has estimated that the two enterprises will issue $15.2 trillion in loan guarantees between 2026 and 2035, with an estimated taxpayer cost of $81.8 billion.

With that much federal exposure, Washington should not encourage weaker risk assessment. If loans are made on incomplete information and the housing market weakens, taxpayers can be left backing losses they never chose to take.

Preserving tri-merge credit reporting keeps discipline at the front end of the mortgage process, before bad loans are made and before losses pile up.

Weak Credit Standards Can Raise Costs Across the Market

Weaker underwriting can affect the secondary mortgage market because investors who buy mortgage-backed securities need confidence that the loans behind those securities were properly assessed. If lenders rely on less complete credit data, investors may view those loans as riskier and demand higher returns.

Analysts cited in the DC Journal op-ed estimate that mortgage rates could rise by 0.125% for every 20-point increase in the score distribution if lenders begin selecting the most favorable single-bureau credit scores. A policy sold as a way to reduce costs at closing could increase costs over the life of a mortgage.

The lesson from 2008 is not that underwriting should be faster at any cost. Risk must be measured honestly before it spreads through the financial system.

Housing Affordability Should Not Come From Weaker Safeguards

Housing affordability is a serious problem for families facing high home prices, elevated mortgage rates, and a shortage of available homes.

However, weakening credit reporting standards is not a serious affordability strategy. It does not build more homes, remove regulatory barriers to construction, or increase supply. It simply gives lenders less information when deciding whether a borrower can afford one of the largest financial commitments of their life.

Sound underwriting protects borrowers, taxpayers, investors, and the broader housing market from avoidable risk, which is why tri-merge credit reporting should be treated as basic risk management rather than needless red tape.

CFE Takeaway

America should not trade long-term housing stability for a small, short-term reduction in closing costs.

Tri-merge credit reporting gives lenders a more complete picture of borrower risk and helps protect homebuyers, taxpayers, and the broader mortgage market. Washington should preserve it.

The path forward is clear: strengthen housing affordability by expanding supply, reducing barriers, and keeping mortgage underwriting honest. That means more accurate data, not less.