Pam Marron Home Lending

How the CFPB “Submit a Complaint” Portal Helped With a Problem in Credit Reporting… and More.

Federal Register.CFPB

How the CFPB “Submit a Complaint” Portal Helped With a Problem in Credit Reporting… and More.

By Pamela Marron

For National Mortgage Professional Magazine | June 2018

On March 1, 2018, The Consumer Financial Protection Bureau (CFPB) issued a Request for Information (RFI) about public reporting of consumer complaints seeking comments and information from interested parties on the usefulness of complaint reporting and analysis, as well as specific suggestions on best practices for complaint reporting. This RFI can be found at https://www.federalregister.gov/documents/2018/03/06/2018-04544/request-for-information-regarding-bureau-public-reporting-practices-of-consumer-complaint and public comment is welcome until 6/4/2018.

CFPB’s “Submit a Complaint” was very useful for reporting the problem of short sale credit that continues to show up as a foreclosure to this day. The credit code issue is critical to the mortgage and housing industry because a foreclosure requires a seven-year wait before a new conventional mortgage can be obtained, rather than the four-year wait required after a short sale.

Because the foreclosure code commonly applies where mortgage delinquency exceeds 120 days, this issue can also result in a new conventional loan denial for consumers who have had a modification or excessive mortgage lates even when the home was sold without a short sale or foreclosure.

An explanation of this problem and the benefit that the CFPB “Submit a Complaint” portal provided proved that a correction/change of credit code was possible on the lender’s end.

Upon learning that the CFPB “Submit a Complaint” portal is at jeopardy of being deleted, it was necessary to write a letter to Acting Director Mulvaney about the useful benefit that the CFPB “Submit a Complaint” portal provides for consumers.

RE: Docket No. CFPB-2018-0006: Request for information regarding Bureau public reporting practices of consumer complaint information.

Dear Acting Director Mulvaney;

In 2010, it was discovered that the credit code for consumers who had a past short sale appeared as a foreclosure. For most lenders, the statement “settled for less than full balance” is the only visible indication of a short sale on a credit report and commonly, if a prospective borrower has exceeded the four-year wait timeframe required after a short sale, lenders proceed with a new mortgage application. Visual written presence of a foreclosure code for affected past short sellers does not appear until the loan is run through the Fannie Mae or Freddie Mac automated underwriting systems (AUS) and a loan denial results with foreclosure noted in the AUS findings. Fannie Mae’s AUS even defines the account name and number. The only other way to see the foreclosure code is in raw credit data that can be obtained through a credit reporting agency, but not all agencies provide this.

The issue was brought to the attention of the CFPB with a major push from U.S. Senator Bill Nelson and the National Consumer Reporting Association (NCRAinc.org) in 2013. After much discussion about whether the issue was a credit code problem within the credit bureaus or an issue with the Fannie Mae and Freddie Mac AUS’s, a resolution was a workaround planned within the Fannie Mae Desktop Origination/Underwriter AUS that would be available on November 16, 2013.

As a mortgage loan originator for 33 years living in Florida, a state that was severely affected with thousands of short sales and foreclosures, I was anxious for the Fannie Mae workaround to provide a correction for the erroneous foreclosure credit code issue. Broadcasting of the November 16, 2013 Fannie Mae workaround was done within the mortgage industry and in the press. Many mortgage colleagues and I had cases ready to input on November 16th. But the workaround was only successful for a handful of clients submitted and angry loan originators across the U.S. let me know that the workaround did not work for their clients.

Out of frustration, I assisted clients to submit their denied loan detail to the CFPB “Submit a Complaint” portal. I was stunned when the response of lenders who had previously stated “there was nothing they could do, this problem is a credit bureau issue…” changed to a deletion of foreclosure credit code, and within 15 days! For cases submitted to the CFPB “Submit a Complaint” portal, a written response of correction from the lender became available to the consumer and a new credit report was able to be obtained within days of receipt of the letter. When the submission with the new credit report to the Fannie Mae AUS was done, in almost every case an Accept/Eligible approval was received. On August 16, 2014, the Fannie Mae workaround was successfully corrected. There is still no workaround in Freddie Mac.

Another instance where the CFPB “Submit a Complaint” portal is being used is to assist homeowners who, due to hardship experienced from the 2017 hurricanes, were eligible for a forbearance of mortgage payments. It was not clear how these mortgage payments would need to be paid back and lenders have either required payment in full or require a new mortgage delinquency to justify a modification.

In both issues noted above, the accuracy and probable downgrading of consumer credit is at stake. Accurate and good credit is the central factor in mortgage decisions and for building consumer credit that ultimately supports our economy.

“Collecting, investigating, and responding to consumer complaints” is one of the six statutory “primary functions” of the Bureau. I ask that you keep the same data fields in the Consumer Complaint Database, supplement observations from consumer complaints with observations of company responses to complaints and maintain the same level of access to complaint information available to external stakeholders such as financial institutions and the public.

Having the “Submit a Complaint” portal available to assist consumers with needed corrections while providing transparency on both sides of a problem is a highly important service to consumers.

Respectfully,

Pamela M. Marron, Licensed Loan Originator, NMLS#246438

June 1, 2018 by · Leave a Comment

About Pam

Since 1985 as a loan originator, highly experienced with automated loan approvals on DU, LP, and with USDA GUS systems, thorough knowledge and use of FHA loans including 203K rehab, conventional loans including USDA, Homepath and rehab, and VA loans. After 27 years, I STILL love this business!

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