FICO selloff yesterday should be bought, says Jefferies

Jefferies says FICO (FICO) shares declined 8% yesterday on concerns that regulators will begin to more closely scrutinize mortgage costs. In comments yesterday, Federal Housing Finance Agency Director Bill Pulte called out FICO by name, and noted the FHFA was actively looking to move to bi-merge credit reports from tri-merge, the analyst tells investors in a research note. Jefferies says that while the overall cost of a mortgage is significant, FICO’s credit-scoring fees are less than 1% of closing costs. “This news appears similar to prior negative headlines that proved transient,” the firm contends. It recommends buying the selloff and keeps a Buy rating on FICO with a $2,500 price target Jefferies continues to believe there is no material risk to FICO’s long-term goal of increasing its share of economics within mortgage. It believes a transition from tri-merge to optional bi-merge would likely have little impact on FICO or credit bureau earnings.