Support starter homes, not looser lending or financial fixes

Housing affordability has Washington searching for fixes. Federal Housing Finance Agency (FHFA) Director Bill Pulte is considering reducing the number of credit reports required for a mortgage to lower closing costs. Others argue that lenders should widen mortgage eligibility rules. And with mortgage rates burdensome, politicians regularly call on the Federal Reserve to cut interest rates or try to intervene in markets to lower long-term rates. While each idea has popular appeal, adding purchasing power while supply is constrained will simply push prices higher. America’s problem is not too little financing, but too few starter homes at prices ordinary families can afford. Consider credit-report costs. A typical three-bureau (tri-merge) report now costs roughly $80 to $100, so FHFA is considering a bi-merge or even one bureau report to look for savings. Likewise, it has expanded credit report competition. The downside is that because the three credit bureaus and the two score providers produce substantial score differences, lenders and borrowers can gravitate toward whichever bureau or score provider produces the most favorable scores. This is likely to introduce investor uncertain...