Effective April 1, 2010 mortgage brokers and mortgage net branch companies will have new requirements to fulfill before they sign up with a credit reporting agency to access credit reports. All mortgage brokers and net branch companies with access to mortgage credit reports that contain Experian credit data (which is currently all credit reports for mortgage purposes due to the repositories’ own requirements) will need to be re-valuated by their current credit report provider to assure compliance with the new requirements. This is mandatory to continue to receive credit reports.
These new rules from Experian are due to the “transitory” nature of the mortgage business and that the recent changes in the industry have raised concerns about the quality of due diligence of some mortgage brokers or net branch operations. The new requirements are intended to mitigate the risks that credit data will end up being used improperly and to make sure that these firms understand the responsibilities associated with credit access. Along with the new requirements, a reminder is also present that misuse can result in the termination of Experian credit data access.
The new rules focus on the contracting and physical inspections of all “end users” of the credit reports. The term “end users” is defined in the Fair Credit Reporting Act (FCRA) as the person who accesses, or “uses” the credit report data. In this case, the end user for a mortgage loan is the mortgage originator and the actual mortgage lender that will fund the loan. As in previous policy, all of these firms are in the chain of end users and need proper documentation for disclosure to the consumer. The new rules will specifically address and require independent physical inspections, copies of state issued photo identification cards of certain employees at each different location in which credit reports are accessed and more restricted access to the credit report data.
The greatest impact of the new rules will be on the net branch mortgage companies. These firms will be required to submit separate contracts and independent site inspections and photographs of each different net branch location. These independent site inspections must be conducted by one of the on-site inspection companies that is approved by Experian. There are hard costs associated with these new rules, as well as new contracts for review. The fee for an independent site inspection with photographs average about $75 per location and can exceed $100 per site, pending the location.
While this new rule will first impact only mortgage brokers and net branch companies that contract with a new credit reporting agency after April 1, 2010, all mortgage brokers and net branch companies will be subject to the new requirements within a year to continue to have access to credit reports from their current provider. The corporate location for the mortgage broker or net branch company will also need to acknowledge that they are responsible for the access of credit reports from each branch in accordance to the Fair Credit Reporting Act (FCRA) and all other applicable laws and Experian policy. Finally, the corporate office must agree that a violation for non-compliance to the new policy, the FCRA, or any of the other laws by a net branch, is a potential reason for the suspension or termination of credit report access.
Watch for further information about these new requirements from the credit reporting agency that you do business with sometime in the near future.
Terry W. Clemans is the executive director of the National Credit Reporting Association Inc. (NCRA). He may be reached at (630) 539-1525 or e-mail [email protected]