Many Credit Reports Contain Errors

Here’s an Associated Press story bout errors on credit reports.

Study: 1 In 4 Consumers Had Error In Credit Report

by The Associated Press

WASHINGTON (AP) — One in four consumers found an error in a credit report issued by a major agency, according to a government study released Monday.

The Federal Trade Commission study also said that 5 percent of the consumers identified errors in their reports that could lead to them paying more for mortgages, auto loans or other financial products.

The study looked at reports for 1,001 consumers issued by the three major agencies — Equifax, Experian and TransUnion. The FTC hired researchers to help consumers identify potential errors.

The study closely matches the results of a yearlong investigation by The Columbus Dispatch. The Ohio newspaper’s report last year said that thousands of consumers were denied loans because of errors on their credit reports.

The FTC says the findings underline the importance of consumers checking their credit reports.
Consumers are entitled to a free copy of their credit report each year from each of the three reporting agencies.

The FTC study also found that 20 percent of consumers had an error that was corrected by a reporting agency after the consumer disputed it. About 10 percent of consumers had their credit score changed after a reporting agency corrected errors in their reports.

The Consumer Data Industry Association, which represents the credit reporting agencies and other data companies, said the FTC study showed that the proportion of credit reports with errors that could increase the rates consumers would pay was small.

The study confirmed “that credit reports are highly accurate, and play a critical role in facilitating access to fair and affordable consumer credit,” the association said in a statement.

Experian, a British company with international operations, also said in a statement the study confirms that consumer credit reports are predominantly accurate. At the same time Experian said it “is not satisfied with this result and we continue to work toward ensuring credit reports are 100 percent accurate.”

The new U.S. Consumer Financial Protection Bureau has the authority to write and enforce rules for the credit reporting industry. In September the agency began ongoing monitoring of the credit agencies’ compliance. It’s the first time they have faced such close federal oversight.
The CFPB hasn’t yet taken any public action against the agencies. However, it is accepting complaints from consumers who discover incorrect information on their reports or have trouble getting mistakes corrected. The agencies have 15 days to respond to the complaints with a plan for fixing the problem; consumers can dispute that response.

By contrast the FTC can only take action if there is an earlier indication of wrongdoing. It cannot demand information from or investigate companies that appear to be following the law.

— AP Business Writer Daniel Wagner contributed to this report.

Changes to Mortgage Insurance Premiums

This information was just released by HUD, regarding FHA, and in particular FHA’s Mortgage Insurance Program requirements.

FHA will increase its annual mortgage insurance premium (MIP) for most new mortgages by 10 basis points or by 0.10 percent. FHA will increase premiums on jumbo mortgages ($625,500 or larger) by 5 basis points or 0.05 percent, to the maximum authorized annual mortgage insurance premium. These premium increases exclude certain streamline refinance transactions.

FHA will also require most FHA borrowers to continue paying annual premiums for the life of their mortgage loan. Commencing in 2001, FHA cancelled required MIP on loans when the outstanding principal balance reached 78 percent of the original principal balance. However, FHA remains responsible for insuring 100 percent of the outstanding loan balance throughout the entire life of the loan, a term which often extends far beyond the cessation of these MIP payments. FHA’s Office of Risk Management and Regulatory Affairs estimates that the MMI Fund has foregone billions of dollars in premium revenue on mortgages endorsed from 2010 through 2012 because of this automatic cancellation policy. Therefore, FHA will once again collect premiums based upon the unpaid principal balance for the entire period for which FHA is entitled. This will permit FHA to retain significant revenue that is currently being forfeited prematurely. Read FHA’s new MIP Mortgagee Letter 

Things to Avoid while going through the Real Estate Loan Process

We’re often asked by my clients what are the “top things buyers should not do during the loan process.” Linda Hulberg at Western Bancorp put together this article with some of the most common mistakes made. Thanks, Linda, for those great words of acvice!

Here’s what Linda has to say:

Don’t go shopping for a car. If you must visit the showroom, at least don’t give anyone your social security number. This enables the dealer to check your credit. Each credit inquiry lowers your credit score even if you do not buy a car. Lenders are increasingly using credit scores to assist in mortgage credit decisions and to price an individual’s loan. High credit scores are good. Low scores aren’t.
Don’t respond in the affirmative to “you are pre-approved for a credit card” mailings. A credit inquiry will result with the same impact as above.
Don’t incur ANY new debt. This increases your debt-to-income ratio, reducing the amount you can borrow.
Don’t file for divorce. This is not advice from Dear Abby. Once you file for divorce, most lenders will not make a mortgage loan until the final decree, setting forth settlement terms, is recorded.
Don’t move money designated for down payment from one account to another. If you do, keep a detailed paper trail. Lenders may request it.
Don’t fail to keep records of any stock liquidation for down payment. Same reasoning as above.
Don’t change the source of your down payment. If your loan application states down payment is from sale of stock, do not simply deliver a cashier’s check into escrow from your bank account. Any change in source of down payment may require the loan to be underwritten again.
Don’t leave town without telling your loan agent and leaving a contact number. You may be needed for a decision or to provide additional documentation. And of course you will need to be available to sign loan documents.
Don’t quit or change your job. Lenders typically call your employer just before the loan records to verify you’re still there. If your employer says you are no longer there, the lender will stop the loan from recording.
Don’t forget to make the payments on any of your present loans or credit cards. This is obvious, but once in a while a buyer forgets, putting the loan (and escrow close) in jeopardy.
Don’t fail to inform your loan agent of any changes to the transaction. Last minute changes such as holdbacks, seller credits or termite work can create havoc with closing dates.
All is not lost if a buyer does a “don’t.” We can minimize or eliminate permanent damage to the transaction, even though delays and stress can occur.