Monday, June 22, 2009
DISPUTED accounts on credit report result in mortgage DECLINE—AU accounts invalidate FICO score?
Just when I thought I’d seen it all.
A client was told by the lender for a Freddie Mac mortgage that they could not even run his application through their loan system as long as there were accounts reported by creditors as “disputed.”
In this particular case, the client’s OLDEST account was a Citi tradeline and we’ll see what happens in response to the dispute of the dispute. It would truly suck if they delete.
http://www.freddiemac.com/sell/guide/#
Click on “AllRegs” in the middle of the page and you can get to the Freddie bulletins and guidelines. Under Chs 37 - 38: Credit Underwriting you’ll find Ch. 37 and when you expand, select 37.5 for credit scores:
... The Seller must disregard FICO scores based on significant inaccuracies. Significant inaccuracies include:
• Public records information on a bankruptcy, foreclosure, judgment or collection that does not belong to the Borrower
• Delinquencies that are reported in error
• One or more Tradelines that do not belong to the Borrower
• Tradelines for accounts for which the Borrower is not the primary account holder, but is listed as an authorized user (Authorized User Accounts). Authorized User Accounts will not cause the FICO score to be disregarded for significant inaccuracies if there is proof in the Mortgage file of at least one of the following:• Another Borrower on the Mortgage owns the Tradeline in question,
• The Tradeline is owned by a spouse, or
• The Borrower has been making the payments on the account for the last 12 months.The Seller must not attempt to adjust the value of a FICO score because some information used to create the score is inaccurate. The Seller may obtain and use a different FICO score from another repository if the score obtained from that repository was not based on similar inaccurate information. This is important both to ensure that the FICO score is adequately indicative of a Borrower’s credit reputation and to ensure fairness for Borrowers in using Credit Scores to evaluate their overall credit reputation.
• For each Mortgage that the Seller has determined the inaccurate information is significant, the Mortgage file must contain written documentation from the repository of credit information or the creditor reporting the inaccurate information affirming the errors. In addition, the Seller is strongly encouraged to inform the Borrower that, pursuant to rights granted under the federal Fair Credit Reporting Act, the Borrower has a right to contact both the consumer reporting agency (repository) from which the inaccurate FICO score was obtained and the furnisher of the inaccurate credit information to require the disputed credit information to be reinvestigated and corrected.
... [emphasis added]
This may be only for MANUALLY underwritten loans, but it sure is interesting. And, apparently my client’s lender won’t even consider MANUAL underwriting and they insist that his loan can’t be approved through the automated system.
Things are getting stranger all the time. I’ll update if/when I get more info on this and please post if you have an explanation for the madness. Do we have a lender gone berzerk?
Credit - Collection - Economic News • (0) Comments • Permalink
