     stephen wheeler (Wheels) | Saturday, July 29, 2000 - 05:15 pm 
To begin, excellent site. I am a CPA and mortgage broker, and I was fishing around for info
about clearing up credit, and ended here.
My dilemna, a first time buyer with an item on their credit report showing up in arrears that was related to child support. fact is, it isn't in arrears and we have documentation to prove it.
the lender says they don't care, but another lender may not have a problem if we can clear the balance due off the report, and i am wondering if there is a way to contact the bureaus and request that they expedite the process.
you seem to indicate in the site that even clearing up credit disputes on the report won't change the fico scores, but i can't see how it wouldn't.
also, do you think that the old pre fico system was better where a woman or minority went to their local bank only to get turned down time and again.
at least fico scores, as impersonal as they are, are color blind and gender neutral.
thanks for the great info on your site. |
| Don Semler (Dsemler) | Sunday, July 30, 2000 - 06:19 am
Clearing the items directly with the CRA will change the score's. Clearing the "old way" by just getting proof and getting yoru credit report provider to reflect the correct info, will not. The only way to change the score is through the CRA's.
What kinda of program are you trying to go for this buyer? FNMA Flex 97? Did you use Automated U/W. DU/LP would probably kick it out due to the child support problem. What are the scores(middle).
If you haven't tried and it fit's FHA limits, this might be an alternative. Also, you could try FMNA Community Hombuyer as the rules are a bit relaxed if they take a class from the MI companies. I'm assuming they are putting very little down.
As for FICO scores. Yes they are color blind, per se. But are they really. They are only as good as they infomation in the system. Garbage in, garbage out. Personally I think they favor upper middle class, educated individuals. Statisticaly this tend to favor White's. Lower income people tend not to use credit or apply or are rejected due to income. They tend to pay cash. Therefor they may not have any tradelines or not enough and thus don't score well, if at all. Also, middle class people tend to be more aware of their credit since they use it and also know and understand how to dispute erroneous information.
Since lower income individuals don't use credit as much, if at all, they may be oblivious to what is on their report or how to correct things. Is a person that pays everything is cash and lives within their means less financially responsible than someone who goes out and finances expensive cars, clothing, etc? |
| Frank Hardy (Frank) | Sunday, July 30, 2000 - 10:09 am
Dear Stephen:
Sorry for the length of this post. I'm a long time lurker and can say that of the hundreds of posts I read - yours was the one that brought me out of the lurker closet.
Let me start by saying your client is in for a rough ride and he better be aware of his potential consequences. While I know this forum is about mortgages, credit etc, your client's actions may very well have other serious consequences. If he really wants to get into the house quick, you might just have him get a sub-prime loan and refinance later- this won't be quick (what you want to do.) Let me explain, for I speak from experience.
About a year and a half ago I applied for a mortgage, as so many on this board have done. I had a Bk about one year earlier but established 5 excellent diverse, active loans afterwards. I had 15 years with the same employer (at the time) and 21 years in the same profession. All other factors were excellent (debt to income below 15%, balance to limit below 25%, high limit never exceeded, 6-figure income, few inquiries etc.) There were some inaccurate entries on my report (subsequently removed with much work) but they were quite old. My broker felt there was little worry - WRONG!
My merged report showed "Child Support" payments in arrears 30, 60, 90, & 180 days. It showed it as "NOW" or better put "Once in last 30 days late, once in last 60 days late etc." You will quickly find on this site that "current" late payments are the kiss of death. Not to belabor the point, I got the loan only though the workings of my great broker, although I paid a heavy price.
Now in many states the law requires garnishment of child support payments - my divorce state is one and the state where my ex- resides is another. This is mandatory by law. Nothing to do with making these payments or not, deadbeat or not - just legal wisdom? As a result each and every one of my payments were AUTOMATICALLY deducted from my paycheck and sent. During the mortgage process I felt this error could easily and quickly be corrected - WRONG AGAIN!
As a quick note. Even during the Bk they were never late due to above. Also, these payments had nothing to do with the Bk. They were not even listed in the schedule C or more accurately schedule F.
I presented a certified-signed document from my ex-wife stating she always received the payments on time. I got a signed document from my employer (a large multinational corporation) stating they deducted every payment on schedule and sent it as dictated by the court. My employer also submitted a pay schedule showing pay dates, payments shipped, check numbers and amounts and eventually even 2 years of cancelled checks. Now this took some time but we were still hoping to delay the close only 30-45 days. All these documents were sent to the 3 CRAs and guess what? "Account was verified 30, 60 90 and 180 days late." Well my broker took this info to the underwriters and "made them cry" and proceeded with the loan.
But that is not the end and this is very important to your client - he must know. Once the CS agency got the CRA request for verification they (the State Child Support Agency) ran another credit report (another inquiry.) They made the unilateral decision that a "review" of my child support amounts should be made. I was ordered to appear in court with all financial documents. Please remember this was not initiated by my ex wife, but by the state. Now the state that did this was not the state that granted the divorce, created the payment amounts nor payment schedule. My ex- is not on any state aid and none of the children are disabled etc. This was, I feel, a unilateral action in retaliation for challenging an inaccurate item on my report.
In conclusion, your client must be aware. As for me I went to court (in a state 3 times zones away.) It costs me over $15,000 in combined fees. My CS payments increased a net of slightly over 10% (I discovered I was paying for a child that the law required I no longer pay for.) The only highlight is that I managed, in the process, to get judge Barr to force the agency to remove the late payments from my report.
"...has been proven that the state maintains inaccurate
and misleading Child Support information in the file
of the defendant. And the defendant has with due
diligence, attempted to have the state rectify such
information, this court orders that the state make any
and all such corrections as specified by this order in...."
Guess What? Trans Union and Equifax have corrected my file. Trans Union from the state and Equifax from my certified copy of the court order. Experian still is showing it as of 7/17/00 - which is nearly 18 months after I started and I spend the time daily on these problems.
Frank
One non-related point with reference to your question/comment on credit-scoring. I disagree with you on the FICO scores and your implied "belief" that they are better than the "old ways." Yes there was race discrimination before and there is race discrimination now. The FICO scoring system does two things. First it is an equal opportunity discriminator (how's that?) And secondly, it creates too many "cookie cutter" brokers. I have no idea what the numbers are, but my experience is that the vast majority of brokers (definitely those on the Internet) want only fast and easy (A) paper loans. It is logical! If you must work for your $4K or you simply stable a few papers for the same $4K - which would you do? Also it covers, protects, rewards and encourages incompetence and the lack of adequate knowledge by most brokers. Furthermore, it fails to adequately compensate those knowledgeable brokers for their time and efforts. Thus making it easier for actual lenders and underwriters to accept only that "A" paper. All the while the client gets another bunch of negative impacting "inquiries" with each renewed rejection.
However, as Dennis Miller may say "But then again, I could be wrong!" |
| Frank Hardy (Frank) | Sunday, July 30, 2000 - 12:58 pm
Wow - Unreal!
I am amazed at how many people are actually on here and how quickly a post is read. Already, I have had several question posed to me privately. Some I will respond publicly for it seems others may have the same question. I am not a legal advisor nor am I qualified to give professional advice in this area. For your personal situation I suggest you contact your attorney (I love that generic disclaimer.) The information I relay and presented in my previous post was my situation alone - yours may vary.
Question #1. "Was the garnishment listed on your credit reports?"
No! My attorney informed me that when the state, county or local law requires it, the garnishment is not entered as a "judgment" and as such it is not listed. My question was "But this is a court order" [the payments.] The response was, while it was an order of the court it did not allow "other actions" (whatever that means.) I think it means, it is a court order to pay child support and the law states when one must pay child support it must be garnished. The order itself does not allow garnishment as long as the order is complied with (otherwise it becomes a judgment or some other 'instrument'.) All legalese to me but suffice it to say in my case it is not reported.
Question #2 "Did your employer react negatively towards you with the garnishment?"
No! Fortunately I work for a pretty good corporation and the folks in the garnishment department (yes we have a whole department in the corporation for these things) were extremely helpful. They told me the exact number of states in the USA that have these mandatory garnishment statutes (I don't remember the number) and the corporation's requirements and obligations. They were the ones that told me that even counties, municipalities and cites have these statutes that may differ from larger government agencies. Meaning states may defer the rules to local entities - wow! The most important point is that they (the company) can not negatively use this information for job "position, advancement or promotion." Furthermore, they can not report this to any outside agency without my express written permission (a hassle when I wanted the data - I had to put it in writing for myself.)
Question #3 "What state did you have this problem with....?"
I choose not to publicly mention but it's two letter postal identifier begins with "C" and ends with "A." Factually, the real problem was with the county using state auspices.
Question #4 "Can the Child Support agency list your payments as a debt?"
I defer to my disclaimer. However, nowhere in my report did it mention my CS payment obligation prior to this problem? With the removal from 2 of my 3 reports, it no longer shows anywhere; however, I still list it as an obligation whenever required. My belief (and fiends that is all it is "my opinion") is that the state that issues the order MAY list it if they choose or if it is their policy. I further believe that since, in my case this state, that caused all my problems, had no jurisdiction or legal right to report anything, they have ceased and desisted. That is not to say a clerk that is ticked off for being slapped on the hands (if such an action took place) can't call the state where the order was filed and "recommend" that they place it in my file. This does not bother me for since I list it anyway, the state simply gives me another "R-1" rating which I deserve (11years of on time payments.)
Question #5 "You said this state was not the state where you filed for divorce. How did they get involved in the first place?"
I don't know! After my divorce but before the final my ex and I sold our home. She moved to the state in question with a transfer from her employer. She got custody of the kids (there was no fight, she's a good mom - we just could not live together.) As a side note she really helped me in court, for her testimony knocked the judge off his bench! The only thing I can guess that gave the state the information is that my daughter (the one I no longer must pay support for) is going to a state university. This state has a special, slightly fee structure for "resident children of divided homes." Possibly since she qualifies under this, the state used the information. In any case my ex used the increase in CS payments to finance the remaining portion of her schooling. This effectively reduced my voluntary contribution to my daughter's education from 100% to 88%. And in August of 2000 my daughter starts her senior year.
Question #6 "Did you or will you sue the state?"
No! Trust me when I was going through this I wanted to sue everyone on the planet - even the Pope for being "a nice guy." I was mad at the world. But I did not and probably will not sue - life goes on and I had other negative credit reporting items that I had to deal with. Let me simply say this. While government agencies are not immune from suit (only judges and prosecutors are immune) I would be better off (and more likely to win) challenging a Great White Shark to a steak-eating contest. No, I got most of what I needed (a corrected credit report) and my limited efforts are better spent dealing with the remaining CRA. I am by no means complacent (my record bears that out) but while not fatalistic I am realistic. I need to correct my credit report, refinance my home and continue to march. No it is not right, fair, legal or any other adjective you want to use, but then again - SO???
Question #7 "When you got it off [the erroneous CS delinquencies] did you increase your FICO or BEACON score?"
I don't know because I have not applied for credit and have a potential lender pull a report. I still must deal with that last CRA and get some inquiries off. Hopefully soon, very soon, "Un" Fair Isaac will allow me to pull my score without putting another possible loan-killing (or at least score-lowering) inquiry on my report.
I hope this answers your questions. Hang in and hang on!
Frank |
