Terry Clemans, executive director for the National Consumer Reporting Association, joined Mortgage Leadership Outlook host Andrew Berman, head of engagement and outreach for National Mortgage Professional magazine, on the Thursday, May 7 episode of the series.
The NCRA is a national trade organization of consumer reporting agencies and associated professionals that provide products and services to hundreds of thousands of mortgage lenders and property managers who use consumer reports for housing decisions.Clemans gave a presentation during his appearance on COVID-19 and its impact on the credit reporting industry. But he cautioned from the outset: “There is only one 'Corona Constant.' What we know as fact today, will be wrong either by tomorrow, next week or next month.”
With regards to the pandemic and the shutting down and/or reduced hours of government facilities, Clemans stressed a lack of access that is hampering processes.
“One of the things we’re struggling with is access to records on time. With the lockdown, we’ve got specific timelines in the Fair Credit Reporting Act that we have to respond within and that creates a variety of challenges,” Clemans said. “If you don’t make an informed decision, you can make an incorrect decision.”
During his presentation, Clemans said the U.S. credit reporting industry is prepared for disaster reporting scenarios. For more than 20 years, it has assisted lenders and consumers in protecting credit histories impacted by disasters from before and including 9/11, hurricanes, major fires, floods, tornados, earthquakes, etc.
He said declared and natural disaster protection has been built into the credit coding system. Called "Metro2," it is the credit coding system used by the “Big 3” U.S. credit bureaus (Experian, Equifax, and TransUnion) and every lender/creditor who reports to them. When properly applied by lenders and servicers, these “disaster” codes are treated in a neutral fashion by FICO and VantageScore to eliminate a negative impact on the consumer’s credit score.
Clemans advised lenders and loan servicers to choose the best option to accurately report only the loans requiring deferment or forbearance following the Metro2 credit coding system.
Here is more advice Clemans had for lenders and mortgage originators ...
Key Issues for Mortgage Originators
►The Tri-Merge credit reports from mortgage CRA’s are required by the Fair Credit Reporting Act and contract to pass through the account terms as reported to them.
►Take special care and precautions when reviewing the credit reports of consumers who have been in forbearance or have deferred payments due to COVID-19 to assure the reporting was done correctly.
►Tips for proper reporting: Look for “D” in the Payment History Profile ... that is the up to 24-month series of numbers that reflect monthly payments. Hopefully that looks like “…111DDD111…” to reflect any deferred payments.
►Important to note that while the credit score will not be impacted, an AUS or underwriter may treat consumers with deferred payments differently, depending on the loan type the consumer is seeking.
►Both FICO and VantageScore treat “AW” and “CP” code accounts as NEUTRAL, and will have no negative impact on the credit score.
Key Issues for Lenders/Loan Servicers
►Work with your legal counsel and compliance team to address the business decisions required to develop a COVID-19 plan.
►Two plans may be needed: Government backed loans or private money loans.
►Choose the best option to accurately report only the loans requiring deferment or forbearance following the Metro2 credit coding system.
►If having issues, seek help from the credit bureau(s) you are reporting to and/or the Metro2 help desk at email@example.com.
You can watch the complete interview between Clemans and Berman below.
See all the interviews from the Mortgage Leadership Outlook series on its YouTube channel.