CREDIT DISPUTES AND YOUR HOME LOAN

You will find there's a little-known and debatable practice by home loan titans Fannie Mae and Freddie Mac,( the people who financially back the home mortgage loan business) that will end your next house loan app directly in its’ tracks.


Let’s take a look at an example: You have great scores: in the 780 range. You have great equity in your home. You want to refinance your home to send your child to college. You have been on the job for 20 years and have more than enough income. The rates are great.

But your bank states: Sorry. We're not able to do the loan. Why? What the ……………………………

Fannie Mae's automated underwriting system won't accept any application in which there is a note in the credit report that a consumer has disputed an account or "trade line."


You explain that the dispute -it was for a medical bill --was valid. The account was closed. The creditor promised to eliminate the dispute notation but evidently never did. The loan officer won't budge. The refi application is dead.

What's happening here? Under the Fair Credit Reporting Act (FCRA), you have the right to dispute incorrect information on any account within your file. When you challenge that information, a notation to this effect must be made on the file (as per the FCRA). So long as it remains, most credit scoring systems generally will not factor the disputed account into the calculation of the consumer's rating. Thus, the potential lender does not receive an accurate reflection of the real score.

Does Fannie Mae deny loans to customers because they used their legal rights?


Fannie Mae’s and Freddie Mac’s automated underwriting techniques -- employed by virtually all lenders doing business -- delivers applications with "consumer disputed" items on credit files back to the lender for what is referred to as "manual underwriting."

Freddie Mac and Fannie Mae do not forbid delivery of a loan . . . where the borrower has disputed information" with their credit report. Their underwriting requires the lender to ascertain and document whether or not the disputed information is correct and underwrite the borrower's credit accordingly. Here is the dilemma: The lenders typically won't manually underwrite because then they have the legal responsibility in the event the loan goes into default. And they typically will not keep these loans on their books. They need to sell them to the secondary market.

Whenever trade lines in a consumer's file include a "disputed" notation, most scoring software disregards them for the purposes of calculating the score.

A significantly delinquent account that could legitimately depress a FICO credit score might be taken out of the equation -- at least temporarily -- if a "consumer-disputed" notation is in the file. Fannie and Freddie are attempting to protect themselves from gamesters and frauds. This did happen a few years ago when sham credit repair companies and mortgage companies would challenge an item just to have it removed from credit scoring. At that time, the bureaus would totally remove the item during the dispute, the score would go up, the file underwritten and closed. Then the trade lines would be added back in once the item was validated and the score drops 50 or more points.

But what about the impact on disputed items when the consumer is correct -- or files in which creditors neglected to remove the disputed-account designation? For the time being, it's tough luck for all candidates with disputes in their credit files.


JOHN MACKEY

What Debt Collectors Won't Tell You About Their Phone Calls

What Debt Collectors Won't Tell You About Their Phone Calls

Debt collection ain’t easy. In a few companies, it may be called the distressed accounts or recovery department. Other companies and law firms are debt collection businesses, which is all they do. They generally have a little bit of "desperado" approach about their work. And, occasionally it's more than merely their mindset that is desperado. Although it may seem like they will say almost anything to make you pay, there are statements that violate the Fair Debt Collection Practices Act (FDCPA), which controls the conduct of much of the debt collection agency industry. Plus, there are some things they will not elucidate.

T’was the Night Before Christmas and They Still Call!

A criticism often heard by bankruptcy law firms from clients who are preparing to file for bankruptcy, and those that have files at collection agencies, is that debt collectors call non-stop, call-after-call-after-call demanding settlement. Even though the FDCPA restricts the collection calls between 8:00AM and 9:00PM, many collectors take advantage of the ignorance of the people they call, presuming they will not know much better.

While bankruptcy and its "automatic stay" should stop all the pestering phone calls, in addition to all other collection activity, it is possible to end the string of phone calls merely by sending a letter to the debt collector.

In the letter, identify the debt and you no longer want to be contacted on the phone concerning it. Right after receiving that correspondence, the collector is only permitted to contact you to inform you that they are submitting a lawsuit to collect your debt and/or that they'll no longer contact you by telephone. Keep in mind, this does not eradicate the debt, but it will stop the telephone from ringing.

WHO IS SUE?  AND WHY SHOULD I CALL HER?

The Federal Trade Commission (FTC) is in charge of monitoring debt collectors. In 2010, greater than a quarter of all complaints (over 140,000) received by the FTC concerned debt collection. And, if companies violate the FDCPA, you can do more than just complain. If your collection agency ignores the letter, (send it certified mail with return receipt, this way you've got proof when it was sent and signed for, and by whom), carefully document every time they phone. Your solution is to then sue and perhaps receive up to $1,000. You may think, "How can I sue, I'm in financial trouble? I can't afford an attorney."

In this case, it is possible. Besides the $1,000, the collector may have to pay your attorney fees. Paradoxically, should you win, the debt collector would precipitously be in your debt.

John Mackey

Can A Collector Call Me At Any Time Or Any Place They Want?

No. Nope. Nada. Nyet. You will find very specific procedures regulating what a debt collector can and cannot do when trying to collect on a debt. They are restricted in the types of things that can be done, and if the collection company breaks those rules, there are monetary (liquid) damages that may need to be paid for the violation. (This is only if a lawsuit is filed).


(Side note: I am conducting a webinar on DEBT COLLECTORS: LIES, DAMN LIES AND DECEIT. You can sign up for it here).


The area of legislation that governs the activities of a collection company is the Fair Debt Collection Practices Act (FDCPA). This federal government statute regulates how, when, and where they may collect. For example, Section 805 states that '... a debt collector may not communicate with a consumer in connection with the collection of any debt -- (1) at any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer. This typically suggests that the collection company can call between the hours of 8am and 9pm. So if a collection company is contacting you at 6am in the morning, or at 11pm at night, then they are violating the law. Section 805 (2) states the collection company cannot attempt communication "if the debt collector knows the consumer is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney's name and address." So if you tell the collection company that you have legal counsel on the matter, and they continue to contact you anyway, they've broken the law as well as your protection under the law.



Section 805 (3) of the Fair Debt Collection Practices Act states that the collection company may not make contact "at the consumer's place of employment if the debt collector knows or has reason to know that the consumer's employer prohibits the consumer from receiving such communication." This obviously means that in the event the collector calls you at your job, and you tell him/her that they can't call you again as it is against company policy or your supervisor will not allow it, and the collector calls you anyway, your protection under the law has been violated.



There exists a relatively extensive list of what the collection agencies can’t do when they try to collect on a debt. Even calling your cell phone is a violation of law (since you cannot be made to incur charges due to the collector's activities, and most people have a plan with their cellular company through which they are billed for minutes used). But many folks are not aware that such laws exist (needless to say, many of the collection agencies do not want you realizing that). If an infraction can be shown to have taken place, then the debt collector must pay you $1,000 in damages. However, this is not automatic: An attorney must be hired and the appropriate actions taken. Additionally, the debt collector must pay all of the attorney fees. What that means is that there won't be any upfront cost for you for having your case filed by a lawyer.