Fair Credit Report Act FAQs
- Why did I get a letter from PMI Mortgage Insurance Co. regarding "adverse action"?
- What is the Fair Credit Reporting Act (FCRA)?
- What is a credit score? Is it the same as FICO?
- How do I obtain my credit score information?
- How has my credit report information caused my mortgage insurance rate to be higher?
- Who is PMI Mortgage Insurance Co.?
- What is mortgage guaranty insurance (MI)?
- Why is mortgage guaranty insurance (MI) needed?
- How does mortgage guaranty insurance (MI) benefit me?
- Who pays for mortgage guaranty insurance (MI)?
- How much does mortgage guaranty insurance (MI) cost?
- How much am I paying for mortgage guaranty insurance (MI)?
- How do mortgage guaranty insurance (MI) companies set rates?
- Do all mortgage insurers charge the same rates?
- When can mortgage guaranty insurance (MI) be cancelled?
- How do I cancel the mortgage guaranty insurance (MI) once it is in place?
- Why didn't I get the letter from my lender?
- Why didn't my lender tell me about this?
- Why did I find out about this after the transaction closed? Can I do anything about this?
- If there's incorrect information on my credit report, how can I dispute my credit report information? Who do I contact?
- I pay my bills on time and I have never been penalized due to my credit history. Why is your mortgage guaranty insurance company not offering me the best available rate?
- Did I have a choice on a mortgage guaranty insurance (MI) company?
- Can I remove one of the borrowers that had the lower credit scores?
Why did I get a letter from PMI Mortgage Insurance Co. regarding "adverse action"?
You recently applied for a mortgage loan and your lender has applied to PMI Mortgage Insurance Co. (PMI) for mortgage guaranty insurance (MI) on that loan. PMI has agreed to provide your lender with MI. In this process, your credit report information was used to determine that the MI rate on your loan will be higher than our lowest rate available for the applicable insurance program.
The federal Fair Credit Reporting Act ("FCRA") requires that an "adverse action notice" be sent to a consumer when a company offering certain types of insurance or terms of credit uses a consumer's credit report information to set an insurance rate or credit terms higher than their lowest available rate.
What is the Fair Credit Reporting Act (FCRA)?
The Fair Credit Reporting Act (FCRA) is a U.S. federal law that regulates the collection, dissemination, and use of consumer credit information. Consumer reporting agencies, which are entities that collect and disseminate information about consumers to be used for credit evaluation and certain other purposes, have a number of responsibilities under FCRA. These responsibilities include the obligation to provide a consumer with information about the consumer in the agency's files and to take steps to verify the accuracy of information disputed by a consumer. Those that use the credit report information for credit, insurance, or employment purposes must notify the consumer when an adverse action is taken on the basis of such reports.
You have the right to obtain a free credit report when you receive a notice of adverse action. You also have the right to receive a free credit report, at your request, once every 12 months from each of the nationwide consumer reporting agencies - Equifax, Experian, and TransUnion.
For more information about your rights under FCRA and how to obtain free credit reports, please visit the U.S. Federal Trade Commission's website at www.ftc.gov.
What is a credit score? Is it the same as FICO?
A credit score is a numerical index which represents an estimate of an individual's financial creditworthiness (e.g., the likelihood that credit users will pay their bills). It is based on a subset of the information in an individual's credit report. Lenders, such as banks and credit card companies, use credit scores to determine credit limits and interest rates.
The best-known credit score in the United States is the FICO score, calculated using mathematical formulae developed by the Fair Isaac Corporation. FICO scores and its variants are designed to measure the risk of default, by taking into account various weighted factors. FICO scores are three- digit numbers ranging from 300-850. An individual has 3 FICO scores, one for each credit bureau - Equifax, Experian, and TransUnion. FICO scores are used under many circumstances including: applying for loans (mortgage, home equity, auto, etc.), opening a credit card, starting cell phone service, or even renting an apartment. For more information about FICO scores, please visit the FTC website at www.ftc.gov (select Fair Credit Reporting Act > Educational Material > Credit Scoring).
How do I obtain my credit score information?
You can obtain your credit score from our nation's three leading credit bureaus - Equifax, Experian, and TransUnion. You have the right to receive a free credit report, at your request, once every 12 months from each of these nationwide consumer reporting agencies. Other than free annual requests, you may have to pay a fee to obtain your credit score information. For more information about obtaining your credit score information, please visit www.ftc.gov/credit.
How has my credit report information caused my mortgage insurance rate to be higher?
Credit scores take into account a variety of weighted factors, often including factors such as your credit payment history, the length of your payment history, and the amount of money you owe. The mortgage guaranty insurance (MI) rate for your mortgage loan is determined by utilizing the credit report information in your credit file provided by the consumer reporting agency. If you request your credit report information from a consumer reporting agency, you can inquire about the factors that influenced the credit score reported by the consumer reporting agency.
Who is PMI Mortgage Insurance Co.?
PMI Mortgage Insurance Co. (PMI) is an international provider of credit enhancement products and lender services that promote homeownership and facilitate mortgage transactions in the capital markets. Through its subsidiaries, PMI one of the largest private mortgage insurers in the United States, Australia, New Zealand, and the European Union, as well as the largest mortgage guaranty reinsurer in Hong Kong.
What is mortgage guaranty insurance (MI)?
Mortgage guaranty insurance or private mortgage insurance (MI) is insurance that is provided by an MI company to protect mortgage lenders against loss if a borrower defaults on an insured mortgage loan. MI allows a homebuyer to make a smaller downpayment than the 20 percent usually required by lenders, allowing them to purchase a home sooner than it might have been possible without MI. Most lenders require MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
Why is mortgage guaranty insurance (MI) needed?
Studies show that homeowners with less than 20 percent invested in a home are more likely to default, making low downpayment mortgages more risky for lenders and investors. For this reason, lenders and investors generally require MI for loans with downpayments of less than 20 percent.
How does mortgage guaranty insurance (MI) benefit me?
MI can make it possible for you to buy a house with a low downpayment, allowing you to purchase a home sooner than you would have been able to if you had to accumulate a larger downpayment:
- If you're a first-time buyer, MI can help you get over the biggest hurdle to homeownership -- coming up with the traditional 20 percent downpayment.
- If you're an existing buyer seeking a more expensive "trade-up" home, MI often allows you to consider a wider price range of homes.
- Both first-time and "trade-up" buyers can benefit by putting less money down and keeping cash for other uses: making investments, paying off debt, or funding home improvements.
Who pays for mortgage guaranty insurance (MI)?
The lender is the owner and beneficiary of the MI policy, thus, the lender pays the MI premium. However, with traditional MI products, the lender's cost for MI is typically passed on to the borrower by adding it to the monthly principle and interest payment. For other types of MI products, the premium charges are passed on to borrowers through increases in the interest rate or fees charged in connection with the loan. The amount and extent to which MI premium charges are passed on by the lender to the borrower is a matter between the lender and the borrower, and is entirely out of PMI Mortgage Insurance Co.'s control.
How much does mortgage guaranty insurance (MI) cost?
Premium prices vary. They are based on the size of the downpayment, type of mortgage, borrower credit history and amount of insurance coverage.
How much am I paying for mortgage guaranty insurance (MI)?
You should contact your lender for information about the amount you are paying for MI coverage or refer to your Truth in Lending Statement.
How do mortgage guaranty insurance (MI) companies set rates?
MI companies' rates are filed and approved by state insurance regulators according to the codes and regulations of each state. Rates are actuarially justified based on a variety of factors.
Do all mortgage insurers charge the same rates?
We cannot comment on other insurers' rates. The rates for all insurers are filed with the stated insurance departments and are generally available for review upon request to the insurance department.
When can mortgage guaranty insurance (MI) be cancelled?
In many cases, MI may be canceled when the loan is paid down to 80% of the original property value. For many loans that closed on or after July 29, 1999, MI will automatically terminate when the outstanding principal balance reaches 78% of the original value of the home. MI generally is cancelable once you have built up enough equity and are current on your mortgage payments. PMI Mortgage Insurance Co. itself cannot initiate cancellation, so you should contact your lender or your lender's servicer if you have questions about the process for cancelling MI.
How do I cancel the mortgage guaranty insurance (MI) once it is in place?
You should contact your lender or your lender's servicer. PMI Mortgage Insurance Co. itself cannot initiate cancellation, but will work to implement the lawful cancellation instructions given to us by our insured lender or its agent.
Why didn't I get the letter from my lender?
This letter provides notice regarding the impact of your credit report information on the pricing of the mortgage guaranty insurance (MI) on your loan. Since recent court decisions have suggested that MI companies could have liability for not providing such notices, we are providing the notice.
Why didn't my lender tell me about this?
We are unaware of your lender's specific procedures, so we cannot comment on any notices or other information provided to you by your lender. We can tell you that the federal Fair Credit Reporting Act (FCRA) requires that an "adverse action notice" be sent to a consumer in certain situations where a company uses a consumer's credit report information. Based on your credit report information, the rate that we will charge for the mortgage insurance (MI) will be higher than our lowest rate available for the applicable insurance program. A recent case law interpreting FCRA suggests that charging this higher rate for the MI provided to your lender in connection with your mortgage loan requires that you receive an adverse action notice.
Why did I find out about this after the transaction closed? Can I do anything about this?
Mortgage guaranty insurance (MI) is requested by lenders in the course of processing a loan application. PMI Mortgage Insurance Co. (PMI) initiated this notice as soon as practicable after your lender committed to securing MI from PMI. We recommend that you contact your lender for more information.
If there's incorrect information on my credit report, how can I dispute my credit report information? Who do I contact?
First American CREDCO can advise you about what to do if you find mistakes in the credit report they provide to you. Contact First American CREDCO at the number listed in the letter you received from PMI Mortgage Insurance Co.
I pay my bills on time and I have never been penalized due to my credit history. Why is your mortgage guaranty insurance company not offering me the best available rate?
PMI Mortgage Insurance Co. (PMI) sets the rate for our insurance issued to your lender based, in part, on information in your credit report. However, we do not have any control over the information that is included in your credit report. Feel free to contact First American CREDCO at the number listed in the letter you received from PMI in order to request a free copy of your credit report and to see, firsthand, the information contained within your credit report. First American CREDCO can advise you about what to do if you find mistakes in the credit report they provide to you.
Did I have a choice on a mortgage guaranty insurance (MI) company?
Because MI is purchased by the lender to protect itself against a possible loss on the loan, the mortgage insurance company is generally selected by the lender, not the borrower.
Can I remove one of the borrowers that had the lower credit scores?
You should discuss this with your lender. PMI Mortgage Insurance Co. merely sets the price for mortgage guaranty insurance based on borrower information provided to us by your lender.
