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Problems with the online dispute system

August 23rd, 2011

When the FCRA was revised by FACTA, they put in a section for “Expedited Dispute Resolution” Section 611a(8) aka the on-line dispute system. If you read that part you will notice this sentence:

“the agency shall not be required to comply with paragraphs (2), (6), and (7) with respect to that dispute” if they delete the tradeline within 3 days.”

  • Paragraph 2 is the part that requires the CRA to forward your dispute and all related documentation you provide to the creditor.
  • Paragraph 6 is the part that requires the CRA to provide you with written results of the investigation.
  • Paragraph 7 is the part that requires the CRA to provide you with the method of verification on request from the consumer.

The law isn’t specific enough to say permanently delete or suppress … herein lies the problem. The CRA can “soft delete” it for 30 days and then the tradeline can reappear when the furnisher reports it again in the next 30 day cycle. This is due to the fact that the CRA’s aren’t required to tell the creditor you disputed it at all.
This leaves a system in place where the consumer thinks they are getting a delete, but it is only temporary. Since the creditor doesn’t know it was deleted, they will re-report it and the CRA will put it back on your report. Furthermore, you lose the hard-copy of the investigation results you would otherwise get if the dispute was done by mail by a reputable credit repair company. This leaves all evidence of the dispute with the CRA’s …where you are assured that they will fight any and all attempts in court.

The Credit Bureaus Defense Strategy of Attrition and Delay

August 23rd, 2011

The “Big Three” (CRA’s) defense strategy was criticized by Judge Posner of the 7th Circuit in the bedbug case as “investing in developing a reputation intended to deter plaintiffs”, which was an important reason why in that case the 7th Circuit upheld $372,000 in punitive damages with only $10,000 in punitive damages (a 37-to-1 ratio).

Consumers need to urge the courts to follow Judge Posner in deliberately recognizing that that is a game played by the CRAs [and most of their furnishers], and that an appropriate outcome of that game will be high punitive damages.

Here is the actual passage from the decision (which is Mathias v. Accor Economy Lodging, Inc., 347 F.3d 672 (7th Cir. 2003), at p. 677:

Finally, if the total stakes in the case were capped at $50,000 (2 x [$5,000 + $20,000]), the plaintiffs might well have had difficulty financing this lawsuit. It is here that the defendant’s aggregate net worth of $1.6 billion becomes relevant. A defendant’s wealth is not a sufficient basis for awarding punitive damages. State Farm Mutual Automobile Ins. Co. v. Campbell, supra, 123 S.Ct. at 1525; BMW of North America, Inc. v. Gore, supra, 517 U.S. at 591, 116 S.Ct. 1589 (concurring opinion); Zazu Designs
v. L’Oreal, S.A., 979 F.2d 499, 508-09 (7th Cir.1992).”

That would be biased and would infringe upon the rule of law by making the punishment depend on class rather than behavior. This is where wealth enables the credit bureaus to mount an extremely aggressive and expensive defense against suits. In turn, this may make it difficult for the consumer to find a lawyer willing to handle their case, involving as it does only modest stakes, for the usual 33-40 percent contingency fee.

In other words, the credit bureaus are investing time and money to develop a

The Inception of the Federal Housing Administration Part 1

August 23rd, 2011

The Federal Housing Administration was developed back in 1934 and did not become part of the housing of urban development until 1965 and at the time the housing market was flat as could be. Hundreds of thousands of people were without work and having to take jobs for less money which made home ownership seemingly impossible before FHA that is. For you folks that feel like it is hard to get approved for a loan today check this out. Most of these loans were balloon payments after a short 3-5 years and max of about 50% loan to value. Before this folks were mainly renters as a matter of fact only 4 out of every 10 households owned their homes.In the year of 1940 FHA had a main focus and that was to help returning veterans coming home from the war get into homes. In the 1950s, 1960s and 1970s, the FHA helped to spark the production of millions of units of privately-owned apartments for elderly, handicapped and lower income Americans. When soaring inflation and energy costs threatened the survival of thousands of private apartment buildings in the 1970s, FHA’s emergency financing kept cash-strapped properties afloat. The main reason I want to start with this was to give all you folks an idea that FHA is here now just as it was 75 years ago!! The main reason why I wanted take a few minutes and give you some history to FHA is for your to truly appreciate what I do for people you should understand that this loan has weathered many housing market storms over the past 75 years and it will continue to do so but at times underwriting guidelines get strict and sometimes loosen up like right now. So for you folks that feel like you can’t be helped you may want to call or email me instead of taking upon yourself and guessing.

How Do You Restore Bad Credit? How Long Does It Take?

August 23rd, 2011

How do you restore bad credit?

A disputed credit listing must be verified as accurate for it to remain on the credit report. If the credit listings contains an error, the credit bureau may simply correct the item, but, very often, disputed credit items cannot be verified because either the creditor either no longer possesses necessary information or does not to go to the effort of verifying it. Furthermore, the investigation must be completed within 30 days or the listing must be removed. For these reasons, properly disputed credit listings are removed from your credit report with remarkable frequency.

At the conclusion of the credit bureau’s investigation, a new copy of the credit report is sent to you along with any deletions or improvements. You then mail us the results and we update your file. The cycle repeats itself at strategic intervals.

How long does it take?

Everyone wants you to see results immediately. Although everyone’s credit history is different, everyone will see responses from the bureaus within the first 45 days. Every month after that your credit picture improves. Credit repair is not an overnight fix, however significant changes can be seen as early as just a couple of months. However a majority cleanup may take between 6-12 months.

The Truth About Credit Repair Companies

August 23rd, 2011

What is true about credit repair companies?

Can they really do what they say they can do? Many “credit repair” companies claim to remove negative credit with the flick of a wrist. Their advertisements make bold assertions and money back guarantees; “Bankruptcy, tax liens, judgments, . . . no problem!! One hundred percent guaranteed!! Credit report 100% cleared in 30 days!!” Can they really make such sweeping guarantees?

While some credit repair companies are outright frauds, others are not frauds and they use the dispute process to obtain impressive results. In fact, they delete thousands of negative credit listings every day.

Unfortunately, it’s risky to trust anyone to help you repair your credit. The majority of credit repair companies were started by entrepreneurs with a penchant for marketing. Consumers have flocked to these “credit doctors” only to discover that their advertisements proved far more impressive than their results. Hiring a credit repair company is like playing Russian roulette as in most cases “you get what you pay for” and once you have a lesser experienced company hack away at your credit file, it’s almost near to impossible for a good company to help you at all.

Working within the credit bureau maze requires substantial background knowledge; knowledge it takes credit repair companies years to learn. In fact, U.S. District Court Judge J. Wexler entered the following legal opinion in the Federal Supplement. “Since allowing third parties to assist consumers will likely lead to the expedited correction of credit reports, it will further the purposes of the [Fair Credit Reporting] Acts.”

The Inception of the Federal Housing Administration Part 2

August 23rd, 2011

I wanted to finish up with a little history on the Federal Housing Administration. Last week I was telling you when FHA started and gave you some insight into how they began and a few of their major achievements. The Federal Housing Administration has closed millions and millions of loans both residential and multi-family and the only thing that has really changed over the past 70 years is the ease of underwriting. There are several different types of FHA programs for us to use to help people with their financing needs. There are programs for borrowers if they are looking to purchase, refinance or even buy a home that needs improvement. There are a lot of myths about FHA loans and how they are hard to work with and get folks approved. I have several case studies where I have personally done the loans and they would blow you away.As many of you may or may not know, FHA was there for the American people when over 2 million construction workers lost their jobs in the 1930’s and 1940’s. Now, FHA is doing the same thing, helping the struggling house market. Weird if you think about it several years later we, the American people, need a shot to the arm and a little break to get us by for now.

I have several different topics I want to go over and explore. Some of the upcoming posts will include case studies of my FHA deals, current myths of working FHA loans, and that is just to get us started!! Thanks again for reading and let me know what topics you wish to hear about in the future. :)

P.S. Make sure you are reading Raymond Denton’s articles too. Reverse mortgages are big and I only see them getting bigger and bigger over the next several years!!

Credit Repair Myth – Checking Your Credit Score

August 23rd, 2011

What can affect your score negatively is applying for new credit, considered a “hard hit.” By ordering a copy of your own credit report or inquiries from lenders wanting to offer you credit is considered a “soft hit” and will not affect your score.

When you search for a loan do so within a short period of time to minimize the damage from multiplecredit inquiries.

The credit score algorithym considers multiple inquiries in a 45-day period as just a single inquiry and won’t pay attention to the inquiries made 30 days prior the score being computed

Mortgage Direct Mail – part 1

August 23rd, 2011

There is a lot to think about when looking into doing a direct mail campaign.

The first thing I would do is to think of a target audience or a niche that you want to be doing such as FHA, reverse, ARMs, purchase, bailout, etc….

The next thing you need to do is figure out how to get the best list of home owners that fit that target audience criteria.

For example if you are targeting for loan products that require high ficos you want a list of home owners that have decent credit and the only way to get that is to get credit data either from a list broker or directly form the credit bureau.

Another example would be if you were looking for ARM recast data to do a mail piece to the ARMs coming due. Most list brokers now have access to this. You can also target the purchase market by pulling a list of renters within a certain area in which they make a good income and or they have good credit.

The demographics of these lists can be targeted by a number of measures….city, county, state, zip codes, radius of a location, etc.

The main thing to worry about when looking to drop a mail piece is your list. This is the most important component of any mail drop. There are a few other factors such as the print, the envelope, the day of the drop, etc. and I will touch on all those as well as the Direct Mail portion continues.

If you have any questions about direct mail please shoot me an email.

Thanks!

Top Ten Myths About Credit Repair

August 23rd, 2011

On the surface, using these services seem to make so much sense you would assume everyone in the mortgage originating industry would be using these services. So the question is, why not?

First let’s outline the top 10 reasons loan officers give for not using these services and then let’s examine them in greater detail.

•1) Credit repair doesn’t work!

•2) Credit repair makes a clients credit worse.

•3) When negative items are removed they come right back on.

•4) Removing old negative items does not improve score that much.

•5) I repair client’s credit myself.

•6) It costs too much, my clients can’t afford it.

•7) Almost everyone I work with has great credit.

•8) I don’t trust people in the credit repair industry.

•9) The process takes too long and is a waste of time.

•10) Unless I can do the loan this month, I really don’t care.

Credit repair doesn’t work!

OK, so here is the bottom line, it does work! When you go on the internet and do a search on credit repair you will see links to a number of websites providing information on credit repair. If you have gone to these websites you know there are a couple of things repeated over and over again. The first is that accurate information cannot be removed from your credit report. Moreover, do not let anyone tell you that it can be. Secondly, there is nothing a credit repair company can do for you that you cannot do for yourself.

What you may not know is that these web sites are created or financed by the credit bureaus. So why are they spending money on these websites? The credit bureaus make money each time credit information is pulled. People with low scores or damaged credit have their credit pulled dramatically more often than those with good credit. Credit bureaus are fundamentally opposed to credit repair companies for one simple reason, it costs them money!

The credit bureaus hate us and our clients love us. We do not dispute that the client has these trade lines; we simply take the creditors and credit bureaus to produce the information that they must have to verify the debt. More specifically, they must prove that everything is exactly accurate. If they do not have the documentation or something is being reported incorrectly, by law they must remove it!

Knowing the specifics of the ever-changing laws is crucial. Now if the consumer knows the ins and outs of the laws as well as we do and has years of experience doing this work day in and day out they could possibly get the same results. They can also represent themselves in a court of law, do their own taxes, and sell their own homes. But they hire attorneys, accountants, and realtors everyday to get the job done most effectively and as fast as possible.

Credit repair can make a clients credit worse.

This is a common misconception. People often mistake credit repair for consumer credit counseling service. Nothing can be further from the reality. Consumer credit counseling almost always shows as negative on a consumer’s credit and credit score and should not be mistaken as credit repair done by a reputable credit repair company.

When a credit counseling agency sets up a 12-36 month payment arrangement between a consumer and a creditor they are actually setting up 12-36 months of late payment history for the consumer. Even if the client makes the payments arranged by the consumer credit counseling service on time, those payments are reported to the credit bureaus as late payments.

Our primary focus is credit score improvement. This is done by removing negative items on the client’s credit report as well as educating the client on how to use credit to positively affect the credit score. The value of our advice can last a lifetime.


When negative items are removed they come right back on.

After we have removed negative items from a credit report it is always possible that the original creditor can re-report the negative item. However, this is rarely the case. Given that the original creditor generally will only hold the debt for 4-6 months, they do not waste time or the money to check on these items and re-report them. What typically happens is that the debt is sold or transferred to a collection agency which will re-report them in an effort to pressure the client to pay the debt. When this occurs we can go back and dispute the items under the same dispute that removed them in the first place.

Removing old negative items does not improve the score that much.

This is another common misconception that is totally untrue. While it is true that negative information is weighted meaning the older it is the less negative impact it will have on the credit score. Common sense should tell us, the very fact that this information remains on the credit report for 7-10 years means it is affecting the score in a negative way until it is removed from the credit report.

I repair my client’s credit myself.

Consider this, as a loan officer you are paid to originate loans. A simple business concept called leverage dictates that the way to make the most money is to spend your time doing the things that generate the most income for your business. For you that means meeting with clients and taking applications. Show me a loan officer who processes their own loans and I’ll show you a loan officer who does very few loans. Focus on the things that pay you the most money for the time you spend doing them and delegate the other tasks to people who are proficient at those things. How many times have you spent hours trying to repair someone’s credit only to be unsuccessful or to have them go somewhere else to get the loan?

It costs too much, my clients cannot afford it.

Given the tremendous impact credit score has on a person’s overall financial life, the question really should be, how can your client afford not to contract with us? Credit affects your client’s mortgage payments, car payments, credit card payments, as well as auto and homeowners insurance, and the list goes on. If we improve your clients score 50-100 points how much can you lower their monthly mortgage payment?

Generally speaking, however much you are able to lower the mortgage payments we can assist the client in lowering the cost of their monthly obligations by an equal amount. So, if you lower the mortgage payments by $250 per month we can probably lower the other bills by $250 a month for a total of $500 a month. This is $6000 every year because of credit!

Almost everyone I work with has great credit.

A few years ago I would have looked upon this as a legitimate objection; today this statement is simply disingenuous. The reality is, if you have been in the mortgage business for 10 years or more you are seeing more bad credit reports than you probably ever have. With the coming changes in the bankruptcy laws this trend will only increase. Currently over 79% of people in the market for loans are candidates for sub-prime mortgage products.

We can fix these broken people for you while you are doing other more productive things. When they are fixed you will be one of the first to know by our auto-matic notification systems. You now have a client who thinks you walk on water as well as have another transaction that otherwise may have been a “no deal.”

I don’t trust people in the credit repair industry.

Every industry has people who do not operate in the most professional manner. In addition, a lot of the negative stigma in the credit industry about credit repair companies is hyped up by none other than the credit bureaus themselves. Think about it for a minute, if a consumer dispute by a consumer or a credit repair company is going to add overhead to the credit bureaus operations and if the dispute process is successful, then the consumer will not be applying for credit as often because they do not need it as much, with this reducing the credit reports sold by the credit bureaus, is it any wonder that the credit bureaus would create bad press about credit repair companies.

The process takes too long and is a waste of time.

There are many credit repair companies who only work on 1-3 negative trade lines at a time, one bureau at a time, until they are removed. If the client has 20-40 negative trade lines which is not uncommon, this could take 2-3 years. Given this, we understand why you might feel the process takes too long. The best credit repair service will go against all three credit bureaus and an unlimited number of negative items at no extra cost to the client.

Unless I can write the loan this month, I really don’t care.

Generally, people who make this statement will not be in the business very long. That being said, we do understand why loan officers feel this way. The constant pressure to produce can be unbearable. So let us address this question with honesty.

The reality is, in certain situations we may be able to bring the score up in 30-45 days to get a loan done. Bear in mind if it can be done we are uniquely qualified to get it done. The goal of service is to increase the scores 50-100 points in 90-120 days. This may allow you to do a band-aid loan today and guarantee a second transaction in the future. In addition, the long term loyalty this can create between you and your client will keep them coming back for life and referring you to all their friends, family, co-workers, etc …

Cease Communication Letter

August 23rd, 2011

Name
Street Address
City, ST ZIP

(Sent via CERTIFIED RETURN MAIL #123 456 789 with RETURN RECEIPT)

Date:

XYZ Collection Agency/Law Firm
1234 Main Street, #100
Any town, USA 10021

Re: File #0000000 – ABC Bank – #4445566778899000 -For: $5555.55

Dear Debt Collector /Debt Collector Attorney:

This will serve as your legal notice under provisions of federal law, the Fair Debt Collection Practices Act (FDCPA), to cease all communication with me in regard to the debt referenced above.

If you fail to heed this notice, I will file a formal complaint against you with the Federal Trade Commission who is responsible for enforcement, the States Attorney General office and/or the American Collectors Association or local State Bar Association.

I have decided that I do not desire to work with a collection agency under any circumstances. I will contact the original creditor to resolve this matter directly, as circumstances warrant.

You are also notified that should any adverse information be placed against my/our credit reports as a result of this notice that appropriate actions will be taken. Give this very important matter the attention it deserves.

Sincerely,

Signature

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