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Are you aware that on July 1st, the three (3) credit repositories, Equifax, Experian and TransUnion, are going to stop most of the reporting of information on consumer’s civil judgments and tax liens? Yup, that’s their plan and they’re stickin’ to it.
Since this information has a negative impact on the consumer’s credit profile, removal will have the effect of an immediate increase in their credit scores. This will present a major challenge to lenders when making their determination of an applicant’s qualification for a mortgage loan.
The CFPB and others state that the reasoning is that much of the information now being reported is inaccurate. This inaccurate information precludes some qualified consumers from obtaining their mortgage financing.
According to David Stevens, MBA’s President, CEO, the elimination of this reporting will make it difficult for lenders to make informed decisions about their applicants.
By artificially raising a consumer’s credit score, it will make the borrower appear to be less of a risk than if the information was reported.
More challenges for lenders in an already challenging housing and mortgage market environment. Once again, in the quest to increase homeownership rates, the credit standards get loosened and the lender must take on more risk.
Lenders may need to do separate civil judgments and tax liens on marginal applicants to make sure of their credit risks. Another increase in the cost of lending!
- Are you aware of this change?
- Are you prepared to do what needs to be done to ensure your applicant’s creditworthiness?
- Do you have all the required checkpoints and reviews in place to ensure a quality, compliant loan in a changing and challenging market?
You need to be ready. Because if things go sideways, you know who’ll pay the price (and get the blame).
