We obtain credit reports and use a desktop underwriting program for Fannie Mae to whom we sell our mtgs. We do not use credit scores in making our decision or pricing our mortgage loans. We use a judgmental process. However, the scores appear on the credit reports and the desktop report (which just pulls the numbers from the CRAs). Do we need to send a notice? Thanks

What do you do with loans that the desktop underwriting program rejects?

If you sell the mortgages and that is why you have the scores, I would consider this in my process. While the test, "did you use it in your decision", I can tell you that what we heard several times at the compliance conference this week was, "if it is in file, disclose it". That seems to be simpler than justifying that it was not used, especially if in a round-about way it may have been used or is gray at best.

One of the factors that DU uses to come up with the rating is the credit score of the applicant. So, like it or not, the credit score IS being used to reach your decision and the notice and disclosure must be sent.

If you search this topic you'll find a number of threads from which the consensus has come that if you get the credit scores you must disclose them. You'll have a hard time convincing your examiner that even tho it's in the file, it had absolutely no impact on your 'judgmental process'.

Great conference by the way - but 1300 ??? O.K. so, we may send the notice...I was looking for guidance on how the notice is provided. For example, as soon as we have taken a decision or included with a declination letter? Or attached to it...or included in the text or a committment letter? I am rather confused about the notice requirement as to when and under what pretext it should be provided. Thank you.

Credit scores fall under §609(g) which says they "shall provide the following to the consumer as soon as reasonably practicable". Clear now?

I understand...a bit. I have both FCRA and FACT in front of me. So, for my DU loans I thought I could provide the notice and score at either the time the loan is closed or together with a decline...but won't that confuse applicants? Also the notice says we used the score when, technically, that is not true. I know I'm nitpicking but I would hate to have all 10 steps correct but mess up due to step #11 not being quite right. Thanks!

Are you using DU in context of selling loans to fannie Mae??

"as soon as reasonably practicable" is not clearly defined but the consensus on these threads is that's within 3 days of making your decision. You CANNOT wait till closing to do this. A lot of us send this out with the GFE & estimated TIL to make sure the borrowers get it in a timely fashion. Sending it with your denial letter makes sense.

And, as I indicated above, DU uses the credit score to get a rating. If the du findings figue into your final "judgemental" underwriting decision to any degree, you've used the credit scores and must disclose them.

We use DU in context of selling loans to Fannie Mae. The Fannie Mae procedure book states that "the FICO score is not an integral part of DU's risk assessment'... OUr regulator called today and said that if we do not reference scores in our underwriting procedures and Fannie Mae does not reference scores as part of their decision, we do not have to disclose...A rather gray area indeed, which is new for Consumer Compliance. Does anyone have an example of a disclosure they have sent out that they could send to me, esp. if they are like us, that is, not using scores in pricing or decision making...but the scores are "around"

Which agency regulates you?

We use DU and sell to Fannie and are regulated by FRS and disclose scores.

Do you sell to anyone besides Fannie? If so, how are you going to prove that the scores DU pulls matter in some cases but not all? Besides, "...is not an integral part..." doesn't read to me that it doesn't count at all.

Just food for thought. The way you seem to be headed, the very least I'd do is get your regulator to put that phone conversation in writing.

I am with Dan on both points and one compliments the other. That is, is the score used. If you say it isn't integral, that doesn't mean it isn't used. And an examiner who didn't provide you that opinion may not agree with the one who spoke it.

FRS is our regulator as well. Do you have a sample of a notice that you sent to one of your customers? If possible, please send me a private notice as I have a couple other questions that I'd like to discuss, in private, of another FR bank. Thanks!

confused...

ok from where im reading... if you obtain the score you have to disclose it. Maybe im missing something where it reads you have to use the score to disclose it back to the customer. read through the forums and continue to see the argument on what "use" is. See this section

(g) Disclosures of credit scores by certain mortgage lenders

go to (A) (i)...in general a copy of the information identified in subsection (f) that was obtained from a consumer reporting agency or was developed and used by the user of the information.

key words there are "obtained"....and the word "or"

if you obtain it "or" -- not and-- developed and used.....
if you requested the score, you have to disclose it wether you "used" it or not.

the point of the reg is to inform the consumer what information the credit bureau is reporting on them...

I think it reads very plainly, but if I am missing other points can some one point this out?

That section is identifying the information that has to be disclosed. You have to disclose the information obtained/used from a CRA, or if you use information that the user developed you have to disclose that information.

ok so we agree?, if you obtain a credit report with a score, you have to disclose it.

I am getting arguments from our loan department on situations where multiple reports have to be pulled - freddie mac loans - and the fact that the only score "used" is the middle score.

The reason i said i was confused, is that its even arguable that the score disclosure is in an unclear area in regards to disclosing it. I have checked with other compliance advisors, as well as read most of the posts here on BOL, and at best, most suggest following the path, we believe will keep us out of any trouble.
I wasnt clear where anyone was reading you have to "use" the score to have to disclose it. any help on this?

Anon,

We obtain a credit score, but state in our policy that we do not use it to make the loan decision. Therefore, we do not send out the notice. We were not criticized by our regulator for this practice. Either we were correct...or lucky!!!

Well, there are lots of opinions that we should cite the scores and send the notice just to be safe. I may ask our regulator to provide their position in writing. I will tell them that there is some confusion about this. If I get a written response, I will advise you.

Rufus, I would say lucky. But that is only my opinion.

If a credit score is not being used, then why obtain it and subject the bank to additional costs? If your loan officers/underwriters truly do not use or refer to the credit score, have the CRAs turn off the score factor and save your bank some money.

isnt there something in the FCRA that says you are only allowd to obtain a credit report / score only for bank business?
If you are not "using" them why pull them?

Again if anyone can cut and paste or point out the section that says only disclose if you "use" them. Again the only thing ive found remotely close is where the reg referrences "those who use a credit score" and similar language, but this is being used as a noun defining the seperation of the CRA generating the score and those lenders obtaining the scores

"the fact that the only score "used" is the middle score."

Really? Didn't you "use" the other scores to determine which score was the middle score? The problem is that since there is no definition of what it means to "use" a score there is no clear answer in some situations. Many institutions are taking the conservative approach and erring on the side of overdisclosure rather than underdisclosure.

I agree with Ted. In a former life, we had to pull 3 scores and use the middle 1 for underwriting purposes per our written procedures. We "used" the middle score to base our credit decision on as far as pricing the loan and (if necessary) determine if we would make the loan or decline it all together. To me, we certainly "used" those high/low scores so that we could be more sure the middle allowed us to make fair underwriting decisions from a ECOA perspective, and also help make a good business decision in that the 3 scores were more apt to ensure we were getting a truer range on the all of the applicable credit history. To me, that's "using" them!