New research from Andrew Davidson & Company warns that moving away from the long-standing tri-merge credit reporting standard in mortgage underwriting could significantly increase borrowing costs and introduce new risks for consumers and investors.
The tri-merge system — which combines credit data from the three major credit bureaus — has historically provided lenders and mortgage investors with a comprehensive and reliable view of borrower creditworthiness. The firm’s analysis found that replacing this approach with single-bureau reporting or alternative credit models could reduce the accuracy of credit risk assessments, leading to unintended consequences across the mortgage ecosystem.
According to the research, weaker credit visibility would likely force lenders and investors to price in greater uncertainty, resulting in higher mortgage rates for borrowers overall. Even small increases in perceived risk can translate into meaningful pricing adjustments, particularly in secondary markets where mortgage-backed securities depend heavily on consistent and predictable credit performance.
The study also highlighted potential downstream effects for mortgage investors, including increased credit losses and reduced confidence in loan performance. These changes could lead to tighter underwriting standards or reduced liquidity in certain loan segments, limiting access to credit for marginal borrowers. Over time, the cumulative impact could shift costs onto consumers through higher rates, stricter qualification requirements, or both.
"We are going through a modernization phase in the mortgage industry," said Sanjeeban Chatterjee, director of behavioral modeling at Andrew Davidson & Company. "At such times, it is important to understand the impact of the changes so that the stakeholders can make the right decisions. This study shows why knowing more is better from a risk management and affordability perspective."
Andrew Davidson & Company emphasized that the tri-merge framework has played a central role in supporting investor confidence and maintaining standardized risk evaluation across the mortgage industry. By providing a more complete borrower profile, the system helps ensure that mortgage pricing accurately reflects risk without introducing unnecessary volatility or uncertainty.
The findings arrive as policymakers and housing finance stakeholders explore potential reforms aimed at reducing costs and modernizing credit reporting. However, the research cautions that changes intended to streamline underwriting could have the opposite effect if they weaken the reliability of credit assessment tools.
