Forum
|
|
Forum
|
     | Thursday, January 06, 2000 - 09:45 pm  this very expen$ive little problem of mine began last spring when i bought another property. it's a very long story, but to make it short, i have been getting the big shaft because of changes made my fannie mae and freddie mac concerning the sale of mortgages on the secondary market. lenders who have known me and worked with me for years suddenly find they can no longer finance me, because although my credit is spotless and i have alot of equity in the properties i own, the FICO score is now the only thing that the bankers can look at for conventional financing. the bureaus are generating substandard scores for me, mainly because i have alot of outstanding debt. there is no sin in this--- lots of people have big debts, and as so long as payments are made in a timely fashion, there is no reason why a consumer should be forced to pay enormous premiums, or even be unable to borrow at all, based upon this arbitrary scoring system. i want to refinance a property to get rid of a load of consumer debt, most of which has been generated by renovations, yet regardless of the equity and spotless repayment history, FICO shafting makes me unworthy. the altenative is to borrow at much higher rates of interest, and i can show actual damages amounting to tens of thousands of dollars over the last year alone. i work for a large real estate company, and our mortgage specialist tells me he would love to see me start a class-action lawsuit against fannie mae & freddie mac, the authors of this fine little nightmare, which i would very well like to do; anyone in a similar situation is welcome to inquire and possibly join in. a few months ago i wrote a letter to freddie mac--- they did give me a personal reply, and i answered back. here is the entire thing for those of you who might want to take the time to read it [sept. 30, 1999] hi lauren-- thanks for responding to my email. i am going to sell a property this fall, and use the 1031a like exchange to avoid paying massive capital gains taxes. i will again be dependent upon fico scoring to get competetive financing for whatever my next acquisition may be. i sincerely hope that the problems that the fico scoring system are causing for me, and doubtless thousands of other consumers throughout the country, can and will be addressed in a timely manner. i made quite a few typos in that first posting--- anyway, i appreciate your attention to this issue, and hope to hear from you again, and perhaps find myself no longer subject to 3rd rate consideration imposed upon from higher powers upon my lenders, when taking out a mortgages. a 1% difference in rate on a $1M note is an extra $10,000 every year i end up paying in interest. that's alot of money to be throwing away, i think you will agree. please do whatever you can to help the system allow low-risk, financially solid consumers financing that is appropriate for their needs, and eliminate the penalties the current fico scoring methods so arbitrarily impose upon such people like myself. it might also be helpful for lenders and consumers alike to be made aware of how fico scoring is done, and what one might do to improve their score, besides paying all the bills on time as prescribed--- that's my idea of a good credit risk. thankyou very much----:) douglas pratt ----- Original Message ----- From: Lauren L Kirby To: Cc: Quality Assurance Sent: Wednesday, September 29, 1999 3:18 PM Subject: FICO scores > > > Thank you for your input regarding how you've been affected by FICO scoring. > I've forwarded your message to the Director in charge of this area so he gets > the feedback. > > Have a nice day. > L. Kirby > > > > "Douglas Pratt" on 09/22/99 11:32:44 PM > > > > To: MFCOMM/IDS/HQ/FHLMC@FHLMC > > cc: > > > > Subject: fico shaft > > > > > > > > > > hi freddie---:) > > i am an american consumer. i live in the boston area, and i have found > myself severly adversely affected by recent changes in underwriting guidlines for sale of mortgages on the secondary market> by the "fico score" criteria imposed upon the mortage industry by > guess who??-- that means you, and fannie mae--- > > lenders i have worked with for years are now unable to finance my real > estate transactions, due to substandard scores generated by computer > programs you have designed and implemented to determine whether or not a mortgage secured by one of my > properties (regardless of equity), and my signature on the dotted line, can be sold on the secondary market.-- > perfect credit now means denial due to "insufficient fico score," in spite > of the fact that i have had no delinquencies on any of my accounts with any > creditor listed in my profile with any one of the leading credit bureaus. > this has cost me THOUSANDS OF DOLLARS in finance charges, as when i > borrow money now, i am obliged to do so from lenders who are not tied to > your ficoshaft rules, the parameters of which you don't release to the > consumer, or even to the mortgage industry itself. instead of 7.5% from a > lender i have known for years, it is 10.5% from a friendly neighborhood > banker who has the freedom to do with their own money as they please, not as > you dictate. don't use the excuse that lenders set their own rules, because > if i have to borrow half a megabuck against one of my properties, and the > loan can't be sold on the secondary market, no one will touch it without > gluing a few points onto the rate, origination cost, or both. fico scoring is no longer a tool to help lenders make decisions;it is a government imposed mandate that FORCES decisions down the throats of lenders and consumers alike. unless the lender holds the note in-house, it now becomes UNFIT for sale on the secondary market anywhere in the country.> > please understand--- there are NO DELINQUENCIES, LATE PAYMENTS, OR > DEROGATORY ENTRIES OF ANY KIND on my credit profile from any of the 3 > leading credit reporting agencies: transunion, equfax, or TRW (experian). > > my wife has store cards, and we pay the bill when it comes. i carry larger > balances on credit cards because at rates between 3% and 6% it makes alot of > good sense to do so. > > we are quite comfortable, but not filthy rich. if bill gates owed $1 million > to several different creditors, he would encounter the same damn thing for > sure, except he could buy you out if he wanted to, and i certainly could > not. > when you have equity well above liabilty, and always pay bills in a timely > and responsible fashion, there is NO VIABLE REASON WHY a consumer should > experience difficulties or pay premium rates for obtaining credit in the > present state of the american economy. > > YOU are the ones who have developed the computer programs that automatically > qualify/disqualify people who wish to borrow money against their property. > today i am unable to obtain financing at competitive rates because of the > industry-wide mandates YOU have imposed upon lenders who WANT to continue to work with but no longer CAN. my net worth today is alot higher than my > outstanding debt, and i would like it to stay that way. i shouldn't have to > incur tremendously wasteful expense, or be forced to sell one of my > properties, because my cash flow has become tight and i can't procure > financing, all based upon a computer-generated SHAFT from YOU---:(*-- > > i dare say your software needs a bit of revision. computers are wonderful > tools, but they ultimately can do nothing more than what they are told to > do. you people probably can't address cases on an individual basis, and > based upon that assumption, it is imperative that you take whatever steps > may be required for each and every consumer to receive fair and equitable > treatment. if the rules are unfair, change them-- you're the only ones who > can. i am stuck now with real estate debt at 10% and higher because of your > "fico score." i never knew than someone with a flawless record could be > evaluated as anything less. > > thankyou---- > > douglas pratt--- BOSTON > my complaint here is with the fico scoring system itself, and how it has damaged me. the credit bureaus themselves are not responsible for this thing-- the rules were re-written by the fed, and my 75%ltv notes are now unsaleable because of the scores- in fact, theses score are the ONLY factor conventional lenders can now consider when making loan decisions. the fact that my cash flow will improve by refinancing a property is something an intelligent banker can consider-- a computer can only consider what it has been told to consider. as written, i believe i can prove, in court if necessary, the fact that these programs are unfair to qualified borrowers (violation of fair credit laws), and severly damaging financially to a segment of the consumer maketplace they are supposed to be helpling. my lenders agree. i even had one of my credit card companies call me and say that i no longer qualify for their lowest interest rate because my fico score went from 680 to 675. if FICO is shafting you, please get in touch-- all inquiries welcome. thanks---:)
|
| | Friday, January 07, 2000 - 07:18 am Mr. Pratt: See the comments of the Federal Reserve regarding "override." http://creditscoring.com/pages/forumtranscript.htm#page176 Also, try word searches on that page for "override," "ignore," and "human," and "manual." Will you contact Congressman Cannon? His office will need actual cases like yours. If they ask, will you testify? http://www.house.gov/apps/list/press/ut03_cannon/credit.html Are you attempting to use Fannie Mae's 90% LTV non-owner occupied program? Please ask the credit reporting agencies some questions like, "If one of the four reasons you give that my score is not higher is that I have too many or too few bank revolving accounts, how many should have?" and "What is the right proportion of balances to credit limit on my revolving accounts to avoid that as being one of the top four reasons my score is not higher." Let us know their answers.
|
| | Friday, January 07, 2000 - 07:57 am Greg: He already said he was going for a 75% LTV loan. Can't you read? As for your override nonsense: Get a clue, Greg. He is working with people he's worked with for YEARS. If there was a way that they could've done the deal for him, they would've. Override and all that is for helping poor credit people own their own home, not for helping those nasty landlord people make a buck. Douggieboy: You said your problem is too much revolving debt, but you pointed out that revolving debt makes a lot of sense when they're offering you an initial 2 or 3% interest and a final rate of 8.9 or 9.9 percent. Granted, but for now I recommend you see if you can't find a private lender that will loan you money on an installment loan that will permit you to pay down your revolving debt enough to obtain the mortgage that you need. Granted the cost of having that much money at a high interest rate for a few months (and perhaps even points) won't be pretty but the savings when you get the right interest rate on your mortgage will make up for it. It's sad to see that you're in a catch-22. You can't qualify for more credit because you don't have enough credit. It's like the old catch-22 that bankers would loan you money as soon as you proved that you didn't need to borrow anything. I'd personally like to see someone take a swing at Fannie Mae and Freddie Mac. Tell me -- are any of your three scores 680 or above?
|
| | Friday, January 07, 2000 - 09:31 am Mr. Pratt: Let me rephrase that in response to Sean's nitpicking. He is trying to answer my question to you-- with no purpose other than to feed his ego. Have you attempted to use Fannie Mae's 90% NOO? Would you like to use Fannie Mae's 90% NOO? Are you aware of Fannie Mae's 90% NOO? Sean (Joe Interjection): I have a clue. Get one yourself. Overrides are not limited to owner-occupied financing. What if the credit report is proven incorrect or not indicative of his character? An underwriter can't set the score aside and make an old-fashioned manual decision? Do you think the only way to get a conventional loan is automated underwriting? Still on that kick about not wanting people to have their credit scores "in writing"?
|
| | Friday, January 07, 2000 - 11:34 am Greg: "What if the credit report is proven incorrect..." What if? It's unlikely that it is since most credit reports are accurate and since he didn't say there was inaccuracies on it. If it is inaccurate it should be corrected and rescored. Greg: "What if the credit report is ... not indicative of his character?" Do you have a mental block about credit or something, Greg? Credit grantors want to know that there is at least a 91.9% chance you're going to pay them back. That means if there is only a 90% chance that you're going to pay them back, they're not interested. That means that 90% of the people that get turned down for credit would have paid the loan in a satisfactory manner. It's not enough for those 90 percent to insist that the credit profile doesn't really indicate the strength of their character. The fact is that 1 person out of 10 won't pay properly and the cutoff is at 1 person out of 11. Lenders are willing to issue him credit -- at a price commensurate with the risk of the group that he is in. He wants to be reclassified into a different group and receive a different rate. I completely understand that. I recommended what I think is a practical way to accomplish that.
|
| | Friday, January 07, 2000 - 07:59 pm Sean: You said, "... most credit reports are accurate... " What percentage of credit reports are accurate?
|
| | Friday, January 07, 2000 - 09:17 pm Good Question! What percentage of credit reorts are accurate? According to the US PIRGS, it's not as you (and the credit bureaus) would like us to think!! But let us not forget that the topic of this thread is: "If I have perfect credit and no delinquencies, why I am I having problems getting loans for new properties and why are my credit card rates being increased because of my credit rating (which has no delinq's and certainly no derog's?)"
|
| | Saturday, January 08, 2000 - 05:43 am Pale Rider!!: You said, "... it's not as you (and the credit bureaus) would like us to think!!" What would I like you to think!!? Please tell me!! And, how about an answer to what it is, instead of what "it's not"!!? It is not a million things!! The topic of this thread is "Credit: FICOSHAFT-- perfect credit, and FICO is costing me BIG $$$$$"!!
|
| | Saturday, January 08, 2000 - 01:49 pm Here's some information I have on credit report accuracy, but it's a little misleading. They claim that 70 percent of credit profiles contain mistakes, but careful reading of their study shows that: 1) They consider outdated information (such as reporting a previous employer the person no longer works at) to be an error. 2) They consider missing credit information (perhaps due to non-reporting creditors) to be an error. 3) They consider a current account being reported twice due to changes in servicing companies as an error. The bottom line is they found 29% of credit profiles to contain errors that could cause adverse action to be taken against a consumer. One could draw the conclusion that 71% of reports are sufficiently accurate, but the methodology of the survey is questionable considering all people surveyed worked for PIRG, but let's just pretend like it could've been valid and go from there, shall we? Secondly, I take exception to the implied message above "If I have perfect credit and no delinquencies..." Obviously the applicant's credit isn't perfect -- no one's credit profile is perfect. Mere absence of delinquencies does not make a profile perfect (as people with absolutely no credit can attest to).
|
| | Sunday, January 09, 2000 - 11:17 am Douggieboy, although I've seen many posts here about FICO scoring, no one can give you the formula for figuring it out. Common sense would tell you that any formula made to compute you as a risk, would first of all take into the formula your income. It used to be the debt to income ratio (DTI). If you have several properties, and several mortgages, but you don't list an income for those properties, such as rental income, all the payments come from your income. I'm not familiar with how a Credit Reporting Agency determines your income, maybe from a bank's application for credit, but if I were you, I'd submit a credit application to the bank with an update of my income. If all those small 3% credit card balances keep you from buying more rental income housing, get rid of them, and with the extra cash from the properties, pay cash for what you charge. Gary.
|
| | Monday, January 10, 2000 - 08:08 am One of the reasons that douggieboy might not be able to get his loan is income? Income does get calc'd in scores (if provided). How about the fact that the mortgagor may not like the properties? Forgive me if this was brought up before.
|
| | Monday, January 10, 2000 - 02:13 pm Kristy: Can you tell me HOW income is included in FICO scores?
|
| | Monday, January 10, 2000 - 02:42 pm Income ISN'T included in FICO scores, but income may be relevant in this case because the guy's loan is being underwritten using FNMA's automated underwriting system. The way that works is the guy's downpayment, FICO score, income and income-to-debt-ratio (and possibly other things I don't know about) is put into a "black box" and something is spit out the other side that basically says whether this is a loan FNMA would be interested in purchasing or not. With all his information in the answer is coming back no thanks. Increasing the apparent income of a borrower is very difficult when he relies on apartment building income. Regardless how well he manages the property a lender is going to apply certain statistics (such as vacancy rate) to the building, even if he can prove he has less vacancy than average. It is not difficult for a skilled property manager to bring his vacancy rate down to 7 percent in my area, while the average vacancy rate is 10 but lenders just consider that "you might be lucky" because they're not in the business of taking risk they'll refigure your vacancy as 10 percent, which can result in "paper" negative cash flow and this greatly harms the possibility of getting a loan. Similarly lenders who see that your maintenance costs "appear too low" (to them) will assume you're deferring maintenance to make your numbers look good or that you're just lucky the water heater didn't break this year and they'll "fix" your maintenance expenses accordingly. Yuck. But if you have more vacancy than normal they won't "fix" your numbers UP. Unfair, don't you think? Considering that the Buyer is doing a 1031 he has a very limited time to designate his target properties and to close escrow on it or he will forfeit the tax advantages. Unfortunate.
|
| | Tuesday, January 11, 2000 - 08:42 am There are lots of different FICO score formulas, some of which Fair Issac customizes for their clients (they said as much at the Scoring Conference.) In these cases, the customized FICO score takes into account information from the credit application, information provided by the customer. This is one way credit scores differ from lender to lender, they sometimes are using different scoring methods. Yes, absolutely, the "generic" (what is the correct term actually?) credit score calculated by Equifax, TU, and Experian do not factor in this information, since they obviously don't have it. The different formulations out there is one of the biggest "excuses" that Fair Issac gives about why releasing a credit score is meaningless.
|
| | Tuesday, January 11, 2000 - 11:19 am As far as I know, these modified Scores have different names, don't they?
|
| | Tuesday, January 11, 2000 - 11:27 am There are 15 base "FICO" scores before aftermarket add-ons are included. These scores are divided into three sections: Beacon Emperica FICO II(TRW model) Then they are broken down further into the generic and the four industry options: auto bank installment revolving credit consumer finance Then the scores get run through add-on scoring models that incorporate the information from the application. For me just understanding the generic Beacon model is enough of a chore.
|
| | Tuesday, January 11, 2000 - 11:33 am Thanks for the info, Sean.
|
Credit Forum CreditCourt Forum 2003 Credit Suit CreditFactors Order Credit Reports |