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If anything good has come from the epidemic of identity theft that has plagued so many in recent years, it might be that American consumers have finally caught on to an important truth; credit counts. And, as a result, they have learned how important it is to monitor their credit reports and their credit scores. Government agencies and consumer groups have been vocal and effective in drilling this lesson home, aided by passage of the Fair and Accurate Credit Transactions Act which, last year, made it mandatory for the three major credit reporting agencies to each provide one free credit report each year to any vigilant consumer who requests one. Credit scores, generally called FICO Scores (the company which provides the formula and software for determining this benchmark is Fair, Issac Corporation) are not included in the Congressional mandate for free reports but FICO sells its scores and the three credit bureaus provide their own versions for a nominal fee.
Three years ago most Americans didn’t even know they had a credit score, even though banks, loan companies, and especially mortgage lenders had used credit scoring for a number of years to measure the creditworthiness of their borrowers. But today even television commercials tout the value of a high score (like the guy whose entire life is haunted by the number 619) and the term is tossed around with great familiarity by everyone contemplating new indebtedness. FICO scores are widely used by mortgage lenders, but the three credit bureaus, TransUnion, Experian, and Equifax, have utilized and marketed their own credit scores from their proprietary databases although their models were based on FICO’s.. Thus a borrower will often find that they have three or four scores that can be quite distinct. In this writer’s case there was about a 60 point deviation from low score to high when I refinanced last year. Further, large lenders frequently use credit bureau information or FICO scores to tailor yet another set of mathematical measurements to suit their own purposes. Still, it is the FICO score that most of us remember.
So, now that we are comfortable with what constitutes a score, what our own scores are, and how that indicates that we stack up, it is all going to change. On March 14 the three bureaus announced that they have collaborated on a new credit scoring system “to benefit consumers and credit grantors.” The new system named VantageScore is, according to Equifax, “a direct result of market demand for a more consistent and objective approach to credit scoring methodology across all three national credit reporting companies.”
The new system will probably still result in variations from credit bureau to credit bureau, but such variance “will be attributed to data differences within each of the consumer credit files and not to the structure of the scoring model or data interpretation.” David Rubinger, speaking for Equifax, said that the new score was expected to reduce the variance by about 30 percent from what it was under the previous model. The three bureaus have formed a new entity, VantageScore Solutions, LLC, but will each continue to market and sell scores separately through a licensing agreement with VantageScore.
VantageScore will use a larger range of scores than FICO which calculates its score in a range from approximately 300 to 850 although we suppose it is possible to have such a bad credit history that the 300 floor could cease to exist. These scores were based largely (a total of 65 percent) on payment history and total indebtedness with lesser weight given to length of credit history, amount of recent credit, and the types of debt. In an example from FICO’s website, a top score could save a borrower over 15 basis points on a typical loan over a rate which would be available so a borrower with a score in the low 600s. Presumably any borrower with even a lower score would have to deal with lenders outside of, shall we say, the normal sphere of the banking industry.
The new VantageScore will range from 500 to 990. VantageScore will also group scores into alphabetic categories covering a 100 point range that will return lenders to a more refined version of the old A, B, C credit rankings. Thus, from 501 to 600 points the borrower will be branded as having “F” credit while at 901 plus the grade will be an A. There is at this point no indication of what the national distribution will be - under FICO the median score is 723 - nor where borrowers’ potential interest rates will fall along the spectrum. The bureaus declined to reveal how various inputs such as delinquency or amount of debt would be weighted on the scale. According to news reports, some consumer protection agencies expressed concern that the new system did nothing to address the underlying problem of errors within the data bases upon which the scores will be bas
NEW YORK and TORONTO, March 20 /CNW/ – MortgageBrokers.com Holdings Inc. (OTC Bulletin Board: MBKR), a compelling and internationally recognizable mortgage brokerage brand and consolidation firm, announced today that its Founder and CEO Alex Haditaghi will invest five million of his personal holdings of MortgageBrokers.com Class A stock to accelerate the recruitment and acquisition of mortgage originators.
The Company indicated the financing is non-dilutive to shareholders, and proceeds will be used to acquire as much as $3.0 billion CDN in mortgage origination volume, resulting in an additional $30 million CDN in gross revenues and up to $4.0 million CDN to the Company’s bottom-line. Mr. Haditaghi, CEO and Founder of MortgageBrokers.com stated, “As we continue to gain momentum in the North American mortgage brokerage industry, I wanted to reiterate my strong belief in the Company’s growth potential by investing my own personal shares to build value in the Company. Our most recent acquisition of Your Mortgage Connection, a $350 million mortgage origination company, was acquired through my personal holdings, and I believe we can continue to execute accretive acquisitions that can accelerate our top-line and time to profitability without causing dilution.” About MortgageBrokers.com MortgageBrokers.com is a mortgage brokerage brand and technology firm working on the consolidation of over 40,000 small and medium mortgage broker enterprises (SME) in North America. MortgageBrokers.com’s consolidation strategy is based on a vision of combining SME brokerages into a scalable operating entity that can better compete in the industry under one recognizable brand. The prime objective is to improve the economic performance of the combined companies though the reduction of operating costs, expansion of a national brand, diversification of product lines and investment in technology.
MortgageBrokers.com is offering an equity participation in its public company, in exchange for mortgage origination books of business, providing mortgage brokers with ownership, a career exit strategy and a retention tool unmatched in the North America.
DALLAS, March 20 /PRNewswire/ — No facts exist to support allegations outlined in a Utah lawsuit that Ameriquest Mortgage Co. took advantage of an elderly woman, an Ameriquest spokesman told MortgageDaily.com, a dominant online news source for the mortgage industry. The Utah woman claims after she contacted Ameriquest about getting a $4,000 loan, two representatives came to her house unannounced at 10:30 p.m. and, with only one light in the house working, convinced her to get a mortgage. But instead of a small, low-interest loan, the plaintiff said she was prodded into a $60,000 loan at much worse terms than she could have gottenelsewhere. A federal judge has ordered that a lawsuit filed on behalf of seven loan officers who claim that First Horizon Home Loan Corp. did not pay them overtime can proceed as a nationwide collective action. The lawsuit alleges First Horizon violated federal law by failing to pay overtime wages to loan originators. First Horizon has contended in court documents that it did not have to pay overtime to its loan originators because they are exempt from federal overtime provisions. In another wage lawsuit, Ohio mortgage broker Rodney K. Cotner and his two companies were sued by the Department of Labor over claims he failed to pay some sales agents minimum wages, failed to pay overtime and failed to maintain accurate records. They were all paid on a commission basis and received no pay during periods when no loans were closed.But Cotner told MortgageDaily.com he is unfairly being singled out as hismpay practices for loan officers mirror what others in the other industry aremdoing — and he has vowed to fight the action. Ocwen Loan Servicing said it is filing a motion requesting that a trial judge either set aside a $1.8 million verdict or grant a new trial. The case involves a $31,000 home improvement loan the borrower was unable to keep current.
