As the pandemic continues to shape the ways lenders and servicers do business, it’s important to know how to stay in compliance with FCRA regulations, as well as the impacts of the CARES Act on these regulations. A major part of these new regulations is the use of forbearance codes on a consumer’s credit report. Here’s a few tips that can help mortgage servicers and originators navigate the use of these codes:
For Mortgage Servicers
As a servicer, you want to report to the bureaus only the accounts that are in forbearance or deferment.
The first code servicers can report is special comment code “AW”, which indicates the borrower has been affected by a natural or declared disaster. It can be used for both current and derogatory accounts.
Servicers can also use special code “CP”, for consumers that are postponing or suspending regular payments until a later time through forbearance. This would be the more appropriate code for reporting if you have an official forbearance program.
The “AW” and “CP” codes will remain on the credit file for as long as they are being furnished, or the duration of the accommodation period. Specific guidance for servicers required to report this information can be found in FAQs 58 and 45 on the CDIA website. For any additional questions about the data reporting format, please contact CDIA and the Metro 2® Task Force at firstname.lastname@example.org.
For Mortgage Originators
If a lender has reported the borrower’s situation correctly, loan originators can rest assured this information will be rendered correctly on any new tri-merge credit reports. Resellers are required by the Fair Credit Reporting Act to pass on whichever information was originally reported to the bureaus during COVID-19 accommodations.
In an applicant’s payment history profile, originators can view a sequence of up to 24 numbers, indicating on-time payments or late payments. In the case of a payment accommodation, these numbers would be bisected by a series of D’s, indicating that the lender reported an “AW” or “CP” code to the bureaus. Ex: “…111DDD111…”
If you’re a mortgage originator, you’ll also want to know if applicants are taking accommodations on other trade lines during the quiet period before closing. Data Facts’ Mortgage Watch provides alerts on forbearance, new inquiries and new accounts opened, and includes a look-back feature so you won’t miss anything that requires your attention. For more information about Mortgage Watch, click here, or email us at email@example.com.