Wronged borrowers first had to deal with foreclosure reviews that were so ineffective and costly that they were cancelled by regulators in favor of a blanket compensation agreement.
Now these recipients who are starting to get checks of various amounts — tied to categories of mortgage-servicer wrongdoing over which they had no control — are trying to clean up their credit reports.
Once again, they are on their own.
The Independent Foreclosure Review agreement, affecting some 4 million borrowers, does not require mortgage servicers to fix the credit of affected borrowers. Some lenders have done so, but many borrowers are still struggling to clear their credit files.
Since the reviews were stopped, regulators were not able to fully determine if the servicers reported incorrect information to the credit bureaus.
Those with erroneous blemishes on their three credit reports have to dispute the items with the banks and three credit-reporting agencies — Equifax, Experian, and TransUnion.
If there is any good news for the borrowers, it’s this: Nothing in the IFR settlement with the 13 mortgage servicers — including the biggest banks JPMorgan Chase, Bank of America, Citi and Wells Fargo — stops eligible borrowers from taking legal actions or any steps to clean up their credit files, even if they receive compensation checks.
Still, for many IFR borrowers this is small comfort in light of the challenges some face in wiping out wrongful or erroneous information on credit reports. A foreclosure on a credit file makes it much tougher to get the best interest rates on — or even qualifying for — future loan products.
Typically, foreclosures will lower a credit score as much as 250 points, and stay on your credit report seven years.
If you continue paying other loan payments on time, within three years your credit score could be improved enough to get you a new mortgage with a favorable interest rate — but that may not be the case in the current environment of tighter lending standards in the post-financial crisis era.
Here are some of the options for IFR borrowers seeking to clear their credit reports of wrongful or erroneous foreclosures or other negative marks by the IFR mortgage servicers:
File Disputes with Equifax, Experian, and TransUnion
By going to http://annualcreditreport.com, all U.S. consumers are entitled to one free credit report annually from each of the three credit reporting agencies. The reports are made available immediately online, providing the borrower the option of disputing wrongful negative marks such as foreclosures immediately. This is the only authorized website to fill orders for the free annual credit reports (credit scores are not free) to which you are entitled under law. All others will charge you for reports and credit scores.
Under the FCRA (Fair Credit Reporting Act), both the consumer reporting company and the information provider (in this case the mortgage servicer) are responsible for correcting inaccurate or incomplete information in your report. To take full advantage of your rights under this law, contact both the credit bureau and the mortgage servicer.
If you have exhausted your free credit report for the year, contact the bureaus directly:
Experian: 1-888-397-3742; experian.com
TransUnion: 1-800-916-8800; transunion.com
File a complaint with the Consumer Financial Protection Bureau
The CFPB has handled more than 6,700 credit reporting complaints, according to its most recent update on overall consumer complaints. The most common type of credit reporting complaint is about incorrect information appearing on the consumer’s credit report, such as information that is not the consumer’s, incorrect account status and incorrect personal information (73 percent). Another common type of complaint addresses issues with credit reporting companies’ investigation of information disputed by consumers (12 percent).
To file a complaint with the CFPB, go here: http://www.consumerfinance.gov/complaint/
In recent months, the Bureau has made it much easier to file complaints against banks and credit-reporting agencies. You can even check the progress of your complaint online.
File a complaint with the Office of the Comptroller of the Currency (OCC)
The OCC, along with the Federal Reserve, are the bank regulators overseeing the IFR agreement. Go here to file a complaint if your mortgage servicer refuses to remove a wrongful foreclosure citing on your credit report: https://appsec.helpwithmybank.gov/olcc_form/
The OCC notes the following for those filing complaints:
We cannot act as a court of law or as a lawyer on your behalf.
We cannot give you legal advice.
We cannot become involved in complaints that are in litigation or have been litigated.
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