Shares of Fair Isaac plunged for a second straight day while rival credit-score providers Equifax and TransUnion also slid after a top federal official targeted them in a bid to lower mortgage origination costs.
Federal Housing Finance Agency Director Bill Pulte, speaking at the Mortgage Bankers Association conference Tuesday, said the agency is looking to replace the "tri-merge" credit scores with a bi-merged score to reduce costs. Tri-merged reports, which combine scores from all three providers, are used to evaluate mortgage borrowers.
The proposal started with the Biden administration, and Pulte said the FHFA continues to support it.
While the three major credit score providers are affected, Pulte singled out Fair Isaac in remarks, according to a research note from Jefferies analyst Surinder Thind.
"I think FICO (Fair Issac) should make sure they're being as economical as possible," Pulte said, according to the analyst note. "We're actively looking at getting it done. I don't like some things I've heard in terms of the cost."
In a response from Fair Isaac included in the Jefferies' note, management said the per-score royalty FICO collects continues to be economical relative to the value the FICO score provides.
"As the lowest of all individual mortgage-closing costs at $4.95 per score — only two-tenths of one percent of total average closings costs — the FICO score is the most cost-effective, valued and trusted tool used in residential mortgage today," the note said.
Analyst Says 'Buy The Dip' On Fair Isaac Stock
The analyst, who has a buy rating on Fair Issac stock, said the sell-off appears to be temporary and urged investors, "Buy the dip."
"This news appears similar to prior negative headlines that proved transient," Thind wrote in Wednesday's note to clients.
Fair Issac shares plunged more than 8% Tuesday and were down 17% Wednesday midday, washing away all gains since April 9. Shares slid below the 50-day and 200-day moving averages in heavy trading, its MarketSurge charts show.
The stock Wednesday is on pace for its worst day since March 18, 2020, when it fell 13.7% amid the Covid crisis. Shares have plunged more than 20% in the two-day rout, according to Dow Jones Market Data. It's the worst two-day period since January 2009, when Fair Issac lost 20.8%.
FICO stock has a Composite Rating of 85.
Equifax stock fell 1.3% Tuesday and was down 4.5% Wednesday, piercing below its 200-day line. The stock had just closed above the line on May 8. Equifax has a Composite Rating of 82.
TransUnion stock lost 1.6% Tuesday and was off 5.5% Wednesday in big volume. The stock had been rebounding from April lows, but didn't quite get to the 200-day line before this week's tumble. Its Composite Rating is 84.
