RBC says FICO should be bought on weakness after GSE privatization comments

RBC Capital notes Bill Pulte, the Director of Federal Housing FHFA, stated that the Trump administration plans to explore ways to better support manufactured housing in the U.S., with the FHFA examining title insurance and mortgage insurance to reduce costs for borrowers. He expressed concerns about FICO‘s (FICO) costs, urging them to be more economical, and mentioned discussing the issue with the title lobby. Furthermore, Pulte stated that the decision to privatize the GSEs ultimately rests with the President. The firm notes that FICO stock is trading lower on Pulte’s comments for two key reasons. First, privatization of the GSEs — Fannie Mae (FNMA) and Freddie Mac (FMCC) — would result in increased competition for FICO’s mortgage credit score. Second, a shift from tri-merge to bi-merge would result in lower Scores volumes. RBC says it remains a buyer on FICO weakness, as it does not believe GSE privatization will have a material impact on the business. The firm has an Outperform rating on FICO with a price target of $2,170.