URGENT: advice on correcting credit report error

I have a loan locked in at a great rate.  My deadline to close is next Wednesday (Oct 28th).  Everything is in order except one big issue:  One of my credit card companies has reported that we disputed account information.  My credit scores are in the high 700's, low 800's.  However the FannyMae underwriting system is hung up on us having a "dispute".  On our credit report under the creditor in question it says "Account information disputed by consumer."

The irony of all of this is that we never have disputed any account information.  We did have one late payment in August of 2003.  This did show up on our credit report and still does.  We called the creditor and asked if there way anything they could do, as a matter of courtesy to a valued customer, to have this black mark removed from our report.  We never disputed the missed payment, we just wanted to get rid of the only piece of negative information on our credit record and thought by asking the creditor nicely, this could be done.

I have placed numerous calls to the credit card company in question.  I have escalated this complaint to the highest level possible.  The best they can do for me is to start another credit information dispute investigation to verify that we don't have a dispute.  This will take 60-90 days.  I have never disputed anything and I don't currently have a dispute.

If the credit reports say that I have disputed the credit card information, is there any hope that I can quickly convince them that I don't have and never have had a dispute?  It appears that the only thing that will satisfy FannyMae is a letter from the credit card company saying the dispute has been resolved.  I can't get them to provide this.  Of course, I do have the letter saying they investigated our dispute and that they were right and they were going to report that fact to the credit reporting agencies.

Does anyone have any ideas for quickly getting over this hurdle.  I can't miss this closing date -- rates have gone up significantly.

My mortgage broker has been very helpful, but he seems at a loss for what to try next.

Any advice would be greatly appreciated.

TM

TM

Doesn't make any sense that lender would be hung up on this (you said Fannie Mae is hung up--but Fannie Mae is not the lender, so I'm assuming you meant the lender your broker sent your loan to).  Letter of explanation should be more than sufficient to meet this requirement if the account is not in collection or charge off status, and has a zero balance or is in good standing now. 

Never heard of "Account disputed" holding up docs or an approval for that matter--and had 3 credit reports with disputed accounts where lender didn't even request an explanation close and fund in the last week.

Let me know how it goes--your broker should be able to get this taken care of without a letter from the creditor...you might get his manager involved if he/she is new to the business and isnt' providing you with a common sense way to clear this issue.

Best of luck--

Frank Ceizyk

Frank,

Thanks for your comments and interest in helping out.  I don't have all of the details, but my broker has the rate locked in with a particular lender.  As the lender has done all of the underwriting work, they have hit upon this issue.  They are using a "Fannie Mae underwriting engine" -- probably a piece of software to assess whether the loan will be eligible to be picked up by Fannie Mae eventually (that's my guess anyway).

Tim

Your broker should be able to update the account thru the credit service pulled.  This process takes 24-48 hours.

P.S. I only lend in the State of Florida

Tim-

I'd press for a resolution to the issue today.  Again, unless the account was in collection or charge off I don't see why it would hold up underwriting or getting your loan to closing. 

Frank

I've never heard of such a thing holding up the closing and it appears many of the other professionals on here can back that up.  I've seen that same line appear in thousands of credit reports and it's never caused any problems.  Is it possible that your broker has some other issues and can't close with the original rate you had agreed on and is now making up excuses for why it can't close?  I wouldn't be surprised if you can't close this by next week that he finds a way to miraculously get it resolved in the following weeks at a higher rate.  Just my two cents.

Tim,

Here is the problem. DU (the Fannie Mae underwriting engine) has come back with this finding:

“DU identified the following tradeline(s) as disputed by the borrower and did not include the tradeline(s) in the credit risk assessment.  The lender must verify the accuracy of the tradeline(s) by determining of it belongs to the borrower and by confirming the accuracy of the payment history.  If the tradeline does not belong to the borrower, or the reported payment history is inaccurate, no further action is necessary.  If the tradeline does belong to the borrower and the reported payment history is accurate, it must be taken into consideration in the credit risk assessment.  To ensure it is considered, the lender may obtain a new credit report with the tradeline no longer reported as disputed and resubmit the loan casefile to DU, or the lender may manually underwrite the loan.  If the tradeline is a mortgage that was past due by two or more payments in the last 12 months, or a foreclosure that has been filed within the last 5 years, the loan casefile is ineligible for delivery to Fannie Mae.”

A recent memo from a major lender said that you have two options when this finding occurs: 1) Obtain written documentation that the account is not the borrower's or that the payment history is inaccurate, or 2) if it is the borrowers and the payment history is accurate, then obtain a new credit report with the account not in dispute and resubmit the loan to DU.

From your post it appears that the only documentation you have says that the account is yours and the payment history is accurate, so option #1 isn't an option.

Which leaves your lender with a requirement that they get a new credit report with the dispute removed so that DU can evaluate the tradeline. As you have found out that is not something that can be accomplished quickly. Do you know what the term FUBAR means?

The best option in a case like this is to swich the loan over to a Freddie Mac loan and run it through Loan Prospector (LP), Freddie Mac's underwriting engine. With LP you only have a problem is you have more than two disputed accounts. Your mortgage broker may be able to switch your lock from a Fannie to a Freddie product at the same rate and price with the same lender.

PS - I forgot to mention that there is a 3rd option. The lender can manually underwrite the loan. But the chances are next to nil that this will happen. With DU or LP findings the lender gets to waive reps and warranties...and in this lending environment they aren't going to pass up that opportunity. So even as stupid as this particular situation is ... common sense (a manual underwrite) is out the window.

Good luck!

:edit: Harlan and I posted at the same time. I'll leave my post intact for reference.

This is a new problem and can be very difficult to resolve quickly. You broker is not telling a lie and the FNMA underwriting system does have specific guidelines for accounts in dispute. I just had to jump through hoops earlier this month. Here is the exact language that came up on my file:

DU identified the following tradeline(s) as disputed by the borrower and did not include the tradeline(s) in the credit risk assessment. The lender must verify the accuracy of the tradeline(s) by determining if it belongs to the borrower and by confirming the accuracy of the payment history. If the tradeline does not belong to the borrower, or the reported payment history is inaccurate, no further action is necessary. If the tradeline does belong to the borrower and the reported payment history is accurate, it must be taken into consideration in the credit risk assessment. To ensure it is considered, the lender may obtain a new credit report with the tradeline no longer reported as disputed and resubmit the loan casefile to DU, or the lender may manually underwrite the loan.

It is very important to check every trade line when pulling credit. Many lenders will absolutely not manually underwrite a loan file. They will require a new credit report and new DU to be run before they will clear the loan to closing. If a LO hasn't run into this problem yet, they will in the near future. From what I have heard, most lenders will only overlook an account that is not the borrowers because when an account is in dispute, it is completely overlooked by the underwriting system. People learned that this was a loophole to temporarily increase credit scores by disputing late payments. Apparently, recent credit legislation requires that an account in dispute by a consumer cannot count against them until there is a resolution.

I resolved my problem by getting documentation from the creditor and having a rapid rescore done to have the dispute removed. It took 3 business days and cost $105. I had to repull a new credit report and re-run DU.

Really kind of surprised that an LOE won't work.  Letter of explanation.   ??? Fico in high 7's low 8's and they're hung on this?

Bob and Harlan are describing my situation exactly.  My understanding is that the rules on underwriting by Fannie and Freddie may have tightened up recently.  My understanding is that my only recourse is to get a letter from the creditor and having the rapid rescore done -- hopefully before the closing date.  My broker suggested moving to Freddie and his underwriter said that we would run into the same problem -- Since I only have one dispute maybe I could run it through Freddie as Harlan suggests -- I'll pass this along to my broker.  Hopefully, he'll be able to convince his underwriter to switch over and get this through.

The irony of all this is that I've never had a dispute.  When we started thinking about refinancing we looked up our credit reports and found a late payment in Aug 2003 to our credit card company.  Since we've been a long-term customer, we decided to ask our creditor if they would do us a favor and have this single black mark removed from our credit report.  As a result of this request, they started a dispute investigation.  When they found that indeed we had missed a payment in 2003 (which we don't contest), they sent a dispute notice to all of the credit reporting agencies saying that we have a dispute.  Moral of the story:  if it ain't broke, don't fix it!

Thanks to all who have offered their assistance -- What a great forum and resource for brokers and borrowers alike!

Tim

I work for a joint venture with Wells. We close manual underwrites constantly...

I cannot imagine a u/w killing this one on a manual underwrite for an issue so trivial if the rest of the file is squeaky clean.

Good Luck,

Jason