When you present a borrower to a lender, you are certifying all the information to the best of your knowledge is accurate.  If the credit repair company is taking off ‘accurate delinquency’such as a mortgage lates, collections or even bankruptcy you are not presenting the borrower’s true credit profile.  This is fraud. 

The fact that the credit repair company has found a loop hole in the law to get the information removed, does not make it OK to then present this delinquent borrower for a loan with an inaccurately representative credit report.  The loan originator and the lender certify with buy back provisions and possible criminal actions that the borrower has not misrepresented their information including their credit.  If you have doubts about this issue, review the Federal Trade Commission website who has lots of information on indictments they have had in relationship to credit repair companies.  www.ftc.gov. 

What have you seen loan originators doing to misrepresent the borrowers to the lenders?

This is fraud.  The application misrepresented the borrower’s intentions.  For those that were involved in this scam, Fannie Mae has stated they will be going after the lender, real estate agent, loan originator, and borrower in these foreclosures.  Have you ever read the application and certification sections of the application?  How is sticking the lender with another foreclosure going to allow our industry to get out of the ‘foreclosure crisis’?

What is your opinion of this issue?

Great questions and in an unusual place, in my opinion.  These regulations are under ECOA (Equal Credit Opportunity Act) section 209.9 Notifications.  Here is how it’s worded in the law.

 (2)  Content of notification when adverse action is taken.  A notification given to an applicant when adverse action is taken shall be in writing and shall contain a statement of the action taken; the name and address of the creditor; a statement of the provisions of § 701(a) of the Act; the name and address of the federal agency that administers compliance with respect to the creditor; and either:
      (i)  A statement of specific reasons for the action taken; or
      (ii)  A disclosure of the applicant’s right to a statement of specific reasons within 30 days, if the statement is requested within 60 days of the creditor’s notification. The disclosure shall include the name, address, and telephone number of the person or office from which the statement of reasons can be obtained. If the creditor chooses to provide the reasons orally, the creditor shall also disclose the applicant’s right to have them confirmed in writing within 30 days of receiving the applicant’s written request for confirmation.

Here is a link that provides more detailed information, and at the end of the page gives acceptable examples of adverse action letters. http://www.fdic.gov/regulations/laws/rules/6500-2900.html

Keep the questions coming!

I’d like to hear your input on this new system!

• LTV’s have been lowered
• New Underwriting and Transmittal Summary has been designed
• Deferred student loans will be counted in the debt ratio
• FNMA updated their automated system to 7.0 Version
•      There is a 580 minimum credit score rule
•      Eligibility Changes for Manually Underwritten loans
•      Retired Timely Payment Rewards program
• Foreclosure policy changed requiring 5 years after foreclosure for 90% LTV and 7 years for higher LTV
• MI charts have changed with some MI companies adding additional restrictions
• No cash out available in declining markets
• Definition of declining market may be decided at the discretion of the appraiser if property in declining market.
• FNMA developed a new Home Saver Advance to help delinquent loan customers bring their mortgage current.

For more on these topics, join our free ’Professional’s Club’.  Linda is working on an update to cover the key points and give access to links that will give detailed information.  Stay informed.  www.mtgtna.com