It really is a crazy time to be
in the mortgage business.
Lenders across the country, large and
small, are feverishly trying to keep
up with the never-ending regulatory
changes, while also navigating the roll-ercoaster that is the MBS market. TRID
2.0, HMDA, UCD, the new 1003—it’s
enough to make any compliance officer
consider changing careers, and sales
managers are just trying to get phones
to ring and loans through the door. It
would be tough to look back and think
of another time where it seemed like
this industry was tackling so many different obstacles at the same time.
So, let’s just throw another log on the fire, shall we?
In 2015, the three major credit reporting agencies
(Experian, Equifax, and TransUnion) entered into a settle-
ment agreement with lawmakers in 30 different states
after it was found that many derogatory credit items were
not accurate. As a result of this settlement, the agencies
will have to remove civil judgements and liens (otherwise
known as “Public Record” items) from reports if they do
not match three of the four following identifying criteria:
• Name
• Address
• Social Security Number
• Birthdate
Whether or not the public record is valid is no longer
relevant to the reporting agencies. If the data does not
match at least three of the identifying criteria, it will no
longer be reported. Instead of dealing with analyzing all
of the data to ensure the liens and judgements meet the
identifying criteria, the reporting agencies have opted to
refrain from reporting ALL public records. According to
FICO, it is estimated that approximately 12 million Ameri-
cans will see an instant increase in their credit score of up
to 20 points as a result of this change, with several million
more who may see a smaller increase.
Earlier this year,Vantage Credit (another credit reporting agency that is mostly used by credit card vendors
and auto dealers) began to use what is called “Trended
Credit Data” in their reporting model. Trended credit
data takes information on nontraditional trade lines, such
as rental history and monthly payment histories, and
incorporates that data into their credit score modeling.
The idea is that those who have very little established
credit may still be a strong candidate for financing, based
on their ability to pay their other obligations and how
well they manage their debt balances. Fannie Mae is also
looking more deeply into trended credit data through
their Desktop Underwriter platform, providing that data is
available on the credit report.
On the surface, these changes seem like they would
be a good thing; increased score for the borrower, cleaner
credit reports, and more opportunity to expand the
credit box. So, why are many mortgage lenders nervous?
The answer is simple. While trended credit data
serves a valid purpose when considering offering short-
term financing options, that data does not depict a true
