Some lost their businesses Many lost their jobs Most seniors lost their money in their 401K accounts Some students could not get grants and loans to continue their educations.                                                                                                                                                          Back to list   Low rate is not available for borrowers who have a good credit, it is just for a few who have 740 score! The low rate that you hear in the news is only available to those who have a credit score of 740 or more. That will be a very small percent of the borrowers and excludes millions of borrowers who have a very good credit, good mortgage and other loan payments history! These borrowers have to pay a hefty price because these credit bureaus who are making billions of dollars from this industry have failed to find  knowledgeable computer programmers to write effective programs for score calculation. I like to say again, Fannie Mae did not lose money because borrowers who borrowed money did not have high scores, but because those borrowers who got the loan had high credit scores and not enough income and credit history!                                                                                                         Back to list

Fannie Mae is relying on just consumers' credit scores instead of their loan payment histories!

Once again all the variables on the credit reports such as: mortgage payment history, car loan payment history, student loan payments history, employment history, rental history are ignored in determining interest rate and the focus is mostly on the credit score. Please read this scenario and judge for yourself whether Fannie Mae's decision to use primarily credit score makes sense or not.

Borrower A with 740 credit score, no mortgage or car payments, no student loan payment history gets 1% to 1.5% better rate than the borrower B with 679 credit score, 10 years mortgage and car payments, student loan and credit card payments history. The reason borrower B's credit score is lower is because there was a $50 medical collection which although it was already paid but it is still showing on the credit report! In this kind of situation there could have been poor communication between the doctor's office and the insurance company which in turn delayed the receipt of the medical bill payment by the doctor's office for over ninety days! By that time the doctor's office had already reported the account as a past due to the collection agency.

	Do you think Fannie Mae is fair to borrower B?
	If you, your parent, or your children were like borrower B, how would you feel?

Those of you who have 740 or higher credit scores should also know that your credit score could be dropped to700 or even less just by having $20 collection past due account on your report! This is how unknowingly you could inherit that $20 collection past due account.

If a clerk in your doctor's office has typed your street address wrong (i.e. you are living at west 76 street but it was typed 67) therefore, you are not going to receive the bill for the $20 balance that you owe. So, this account will go to the collection. Since the amount is too small and there is not much commission in this account for the collection agency, so instead of contacting you, they will report to the credit bureaus. At this point, your credit score will drop to less than 740! Some consumers do not know  how much a $20 past due will reduce their credit scores..

	Is that fair that you pay for someone else's mistake?

If by continuously changing credit score requirements, Fannie Mae thinks that suddenly they are going to find the magic credit score number that is going to solve their problems, they are incorrect. Fannie Mae and Freddie Mac lost billions of dollars not because borrowers who obtained loan did not have higher credit scores. They lost because, borrowers who obtained loans had  higher credit scores but not enough incomes. Fannie Mae and Freddie Mac were more aggressive than the sub prime mortgage companies! Some sub prime mortgage lenders would not allow debt to income ratio exceed 55% but, Fannie Mae used to allow 65% or even more debt to income ratio if borrowers had higher credit scores.                                                                                                                                                         Back to list

Since last year, Fannie Mae and Freddie Mac have started using car salesman technique! Car dealers normally advertise their cars with low prices, but when you finally buy the car you end up paying more! They tell you that the advertise price is the base price and you need to pay extra for more options which you thought were already included!

Twelve months ago, if borrowers called banks or mortgage companies and asked about interest rates, all that the loan officer had to do was to look at the rate sheet and tell them exactly what their rates would be for purchase or refinance. If borrowers had good credits with scores between 640 to740 and 5% or more down payments their rate would be the same.

Today, it is totally different! For each credit score you get different rate. Your rate also increases or decreases depending on your down payment. You may even get higher interest rate if you put more down payment! ( isn't it confusing?)

To prevent the inaccurate information from showing up in consumers' credit reports, congress should step in and set some guide lines for the three Credit Bureaus who are preparing the consumers' credit reports. Now, these credit bureaus who are making billions of dollars from this industry are not doing their jobs adequately and are not using a good quality control system to check the accuracy of the information they get from their clients! Their important task is collecting information from their clients and adding those to consumers' reports. If  these creditors or collection agencies who are reporting to the bureaus make an error on their reports,  then consumers will pay a huge price for something that was not even their fault. This is what happens to consumers.

If it was 10 or more years ago and this kind of mistakes were done by a third party, then it wouldn't hurt the consumers as much as it does today. At that time,  consumers could prove that they had no fault by providing documents such as canceled checks or a letter from their creditors or collection agencies saying that the error was from their side. Then, the underwriter could override the credit report, But, today all the loan rates are based on the credit scores. Even in order to qualify for a particular loan program you need to have a certain credit score.

You might think that since this error is done by the credit bureau or their clients ( collection agencies), therefore it can be fixed right away, but it takes months to get it fixed if you spent a lot of your time writing and calling . However,  recently these credit bureaus have come up with a plan. If you pay a huge fee,  then they fix it right away.

As you see this can happen to any one of us! For example, If you have a 740 credit score today, it could be reduced to less than 700  by one wrong trade line. If that happens, then you will start paying high interest rates too! If you want to know how easily your late or past due bill could be reported without your knowledge and without your fault, then read the scenario by clicking here.   

This example will show you how these programs are inaccurately evaluating the consumer's credit scores.  let us assume that Mr. Smith has 15 credit cards with combined credit line of $150,000 and a total balance of $75,000, but the way he splits the $75,000 among15 cards, the balance of none of them reaches 60% of the credit line of each card. By doing that  Mr. Smith has maintained a score above 720.

 Mr. Smith sells his lake house and gets enough cash to pay off all his credit card balances, but he does not close any of his  accounts.

After a while he receives an offer from one of his credit accounts with a $15,000 check attached with a fixed interest rate of 2.99% for life of the loan and $300 transfer fee. The credit limit on this card was $15,000. Mr. Smith accepts the entire $15,000 and he sends it  to his mortgage company that has his primary home mortgage loan. By doing this he tries to save some money since his mortgage interest rate is 6%. In a few months, If Mr. Smith checks his credit score , he will find out a noticeable drop in his credit scores even though his debt has reduced by $60,000. This happens because the program which calculates the credit scores does not take into account the total credit line of his credit cards, but considers only each card's balance with its credit limit. Imagine how many people fall into this trap.

Your credit score is not like your jewelry or the title of your property that you could put in a safe or hide some where so that no one can access it. Your credit score comes from your financial information that not only is every where in the states, but also all over the world due to out sourcing customer service jobs to overseas!

Whenever I call Chase to obtain information about my account, someone from overseas answers! We have a lot of laws in this country to protect us against fraud, but still we are not 100% safe! Now that some people in overseas have access to our account information, knowing that they may not have the same laws we have here , then how safe really is our information?                                                                                                                                                      Back to list

 It happens a lot! Some of it happens in the post office due to malfunction of equipment, others happen during mail sorting.  I always get some other people's mail, mostly our neighbors' mail at home or at the office. I normally deliver to them and our neighbors do the same. A few times I even got some people's mails who live in different cities! I normally drop them in the mail box. This especially happens more when the address is a post office box. The clerk always used to put other people's mails in my mail box. If this kind of things happen to mail of your mortgage company that you are sending your mortgage payments to, and your credit card company that you are sending your credit card's payment, then they may not get your payment 100% of the time. Just that one past due payment on your mortgage will drop your score about 50 points and you will not be able to refinance your home at least for another12 months!

Let me share my own real story on this matter. I have a home equity line of credit with Chase with a credit line of $30,000. About two years ago, I had a very small balance with monthly payment of about $30. On the 27th of the month I got a phone call from Chase that they had not received my payment.

I told them I would overnight the payment because I didn't want 30 days to be reported. They suggested that the fastest way was to withdraw from my checking account if I would give them my checking account information. I agreed and I provided all the needed information. I checked every single day until the third of the following month. Chase had not withdrawn the payment from my account. So, I called them and they assured me that everything was OK.

After two months, I got a letter from chase that they had reduced the limit of one of my credit card accounts which I had with chase. Then, when I ran my credit report, I found out that they had reported 30 days past due. When I called, all they said was that they were sorry!. That 30 days past due reduced my credit score.

Now, to those who are working for Chase, sorry won't raise my credit score to where it was before. It took many months for my credit score to go up! Since my report was showing 30 days late pay in my line of credit ,I could not refinance or get a new mortgage if I wanted to move for any reason.                                                                                      Back to list

Whenever you call the customer's service of a department store's credit card to check the balance or if you have an issue, you are not actually talking with the employee of that department store but, you are talking with the employee of another firm that has contract with the department store to answer their customers' issues.                                                                    

These employees are required by their employers to sell some service to you. I think there is nothing wrong with that if you agree but, sometimes if some of these employees do not sell enough to meet their quotas, then in order to keep their jobs for a little longer, they may add some services to your credit card regardless of the fact that you told them you were not interested. Please remember to open and check all the bills which you receive even if you know that you do not have any balance.

This is what happened to me many years ago.  I went to sears to purchase an item around $20. I wanted to charge it to my VISA card but, a very nice lady suggested that if I open an account with Sears, she would take $10 off that price. I did so and I paid as soon as I got the bill. Since I did not purchase any thing else and I was the only authorized user, so whenever I got a bill I did not  open it. But, one day somehow I opened the mail. There was a $72 charge! I called and asked the customer service about the charge. I was told that I had purchased some kind of insurance coverage about two months ago. When I told them I never talked with any one about buying any insurance coverage,  they agreed to remove that transaction.

If I had not opened that mail, then I could have been 90 or 120 days late on that account which would have reduced my credit score to 620 or less.                                                                                                                   

If a clerk in your doctor's office has typed your street address wrong (i.e. you are living at west 76 street but it was typed 67) therefore, you are not going receive the bill for the $20 balance that you owe. So, this account will go to the collection. Since the amount is too small and there is not much commission in this account for the collection agency so, instead of contacting you, they will report to the credit bureaus. At this point, your credit score will drop less than740 . Some consumers do not know how  much a $20 past due will reduce their credit scores.

These days, it is becoming very common for the credit card companies to reduce the limit of consumers' credit cards down to the amount of the balance they owe or even less. When that happens, consumers' credit scores will drop considerably! It is understandable if they reduce the limit when consumers pay late. But, sometimes that is not the case. They do it for unknown reasons! Maybe sometimes themselves are in trouble. But, that should not give them any excuses to ruin consumers' credit.

I have been working in mortgage industry since 1993. I started as a loan originator and I have processed thousands of loans. I read and evaluated every credit report in the file before I submitting to the investors' underwriters. During the process, I have talked to some of the borrowers who had a past due or collection account and I have heard many interesting stories.

From 1984 to 1993, first I was working as an insurance agent for an insurance company and after a few years I became an independent agent. After a while I opened my own small insurance agency. The group or individual health insurance was my primary focus area. I spent considerable amount of time on the phone with doctors' offices, hospitals and insurance companies on the issues that my clients had regarding their medical claims.

I have mortgage loan, credit cards payments, and occasionally medical bill payments like many of you.

                                                                                                                                                                             Back to list    AGF Mortgage