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Bank Errors Cause Damage to Credit, Distress to Homeowners

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(Davis Turner/Getty Images)

We’ve pointed out cases in which banks’ miscommunication and disorganization have caused mistaken foreclosures, but as several recent reports have noted, that’s not the only way in which bank mistakes have affected homeowners.

Some consumers have been surprised to see damage to their credit score after requesting information from the banks.

One Nevada homeowner told financial blogger Barry Ritholz that after he asked Bank of America about who owned his mortgage, he suffered a drop in his credit score even though he’d never missed a payment on his home. Though some advocates expressed concern that it could be a case of bank retaliation, a BofA spokesman told the Huffington Post that it may have mistakenly coded its report to credit bureaus to reflect a homeowner dispute:

Certain wording used in the letters brought to the bank's attention may have been interpreted in some cases as raising a possible dispute. The bank is taking steps to clarify the handling of these requests, and when and if a dispute coding should be placed on the account," the spokesman said. "In any case, once a possible dispute has been researched and the findings result in the removal of the dispute coding, it should no longer be reflected in the customer's credit profile. Bank of America will review files that may have been impacted and make any necessary corrections in credit reporting.

In another reported case, one Connecticut couple saw their credit score destroyed after they asked Bank of America about refinancing and were mistakenly placed in the government’s loan modification program, according to Connecticut Watchdog.

They had never been late on a mortgage payment, but because the bank had erroneously put them in a trial modification, it reported an “AC” code to credit bureaus—a code that indicates the couple was making partial payments. Bank of America apologized for the mistake.

“What happens I think is some lenders pull reports periodically, and they see that AC code, and then they go adjust the credit lines [even if borrowers are current on their payments],” said Norm Magnuson, spokesman for the Consumer Data Industry Association, a trade association for credit bureaus. “It’s a complicated topic and it’s caused confusion certainly among consumers but also among some lenders.”

Magnuson told me that the industry has guidelines about credit reporting data, including when banks should use the AC code and when they should use a newer code that has no effect on credit scores. But those guidelines aren’t binding for lenders and servicers, and as we’ve noted, credit scores can take a hit when information is reported incorrectly.

The Connecticut case is one recent example, but it isn’t the first time that Bank of America has made this particular mistake. The Minneapolis Star-Tribune reported in August that the bank signed up a Minnesota couple—also current on their mortgage—for a loan modification that they didn’t apply for. The mistake caused their credit score to drop 150 points. It was restored after the couple filed complaints with their state's attorney general and federal banking regulators.

Credit scoring is a joke. I Wonder how and why Fair Isaac came up with this BS . As an individual you are not in control of your score. If a bank mess up, It can take 3 months to fix it.  Fix it with just the one bank who screwed up your credit score. As far as the rest of your credit cards, you can kiss the limit good by. And your score will take a long time to be repaired.

It is another way of controlling people,  and if a bank making a mistake good luck fighting with them. You as a consumer you have no right or resources to go against a Bank who unjustly may have ruined your life.

If A bankster would know its customers and not relaying on numbers from thousand of miles away from a computer maybe our banking system could be better.

But the American majority public is nothing but a number. The elitist of course are known by name.
The average American working class is just like in
AUSCWITCH # 3875309. But we all know who is Jamie Dimon or David Lowman by name.
And by the way their # is secret.

This is a great movie about the banks. It is called

          THE AMERICAN DREAM         (30 min)

    http://www.youtube.com/watch?v=Kv2oCXbW4r0

@Gabor,

Credit Scores are an estimate of risk, plain and simple.  Errors in reporting on behalf of a bank are regrettable, and corrections should be much faster/easier to correct for the devastating effect they can have, but errors are the exception.

The alternative to something like a credit score is the way the MPAA, RIAA and Microsoft treat consumers.  That is, they assume everyone is a criminal and treat everyone accordingly.  I have an excellent credit history, and I don’t want to be treated like my sister who ran up CC bills with no intention of even making the minimum payment.

Reform, even radical reform of how credit scores are reported and corrected make sense.  Throwing it out and treating everyone as a criminal is just plain myopic.

I agree with both Joshua and Gabor to varying degrees. I have extensive experience managing my credit score and reading up on the subject.

What little information is out there is fragmented, simplistic and most people don’t understand or know to seek the info out. The credit reporting process needs full transparency.

Correcting errors should be easy. I’ve been trying to correct an account not reporting for over a year and both the bank and the credit agencies give me the run around.I’ve done everything they’ve asked and got 1 report to reflect the account only.

Then there are the myths of how to build credit that cause people to accept ridiculous terms and pay higher interest fees than they should. Capital One used to not report credit lines which would hurt people’s scores if they were responsible users of their credit.

The list goes on and on. I don’t want to get rid of the system but i do want it revamped, and to provide more weight to payment history than revolving credit. because if all your credit card companies decide to reduce your credit lines or close your accounts you as a user have no say in the matter. I recently had my account closed on a card i was never late on…2 phone calls later they reopened it. I’ve had my credit cards more than double the interest (except for USAA) and i see online I qualify for way better. but getting rid of the high rate cards or replacing them is a complicated kabuki dance with your credit score as new accounts and credit lines drop your score with the hard inquiry, and affecting the average age of accounts and also the old account that is closed affects the available credit and average age of accounts. so changes like this have to be phased in and well timed if you are smart about it so you reduce the effect. but this is stuff most people have no clue about.

It is time consuming and maddening to learn the “rules” of the game. I was recently told by one of the bureaus that my score may be negatively affected because I have a credit card that I am not using. I’m using my other cards and they are never late, and rarely if ever over 10% of the limit.So OK, I’ll use it the other one. But who knew?

“Fair Isaac”.
Not really.

My ten + years of Mtg payments never went reported by Washington Mutual (now Wells Fargo) and my credit took a hit. How much additional have I been paying??
I filed a complaint/investigation with the Fed, never to be heard from again.

Politicians are giving Prostitutes a bad name.

@Barb Your credit score will not be affected by an inactive card as long as the account is open and in good standing. Now if you never use it and the Card company closes it for inactivity then it will hurt to varying degrees. You can go months at a time without using a card. I typically empty all of them out leading up to large purchases like a car or home. Yes I’m saying that that bureaus told you wrong…the “may” is the catch…there is no “may” if you ask enough it’s black or white.

Key thing about keeping balances low is that in effect it makes people’s real credit line be much lower than their listed credit line. If you have a 10,000 dollar card and use only 10% then you really only have a 1000 dollar line to use for spending unless something crazy happens like an emergency.

@Desmond That is just tragic, similar to my situation…what does someone have to do to get a bank to report something they reported at one point before. It is crazy how hard this stuff is. and the bank and credit agencies give you the run around.

as far as politicians go…today my congressman sent me an email with the follow top 3 goals for the GOP. #1 cut government spending, #2 repeal health care reform, #stream line the tax code and cut everyone’s taxes. if you do #1 and then repeal #2 it is like taking a step forward and 2 steps back and then #3 is another step back and we’ll revisit #1 and repeat the cycle…until medicare, social security and medicaid are history.

It is absolutely bizzare what these banks are able to get away with. My situation in regards to this matter has escalated to the point I have now been denied consideration of employment due to my now low credit score. Thanks to the folks at BoA. I sent in a QWR (qualified written request) back on Sep. 14th asking just ONE specific thing…“name, address, and phone # of who owned my note”. BoA sent a letter to me stating EXACT same things as in this article, along with “In your letter, you expressed dissatisfaction with various aspects of the origination of the above referenced loan. You requested BoA to provide you with numerous copies of documents relating to the origination of the subject loan and a loan history including fees assessed to the subject loan. Please note that a credit block was placed while the issues in your letter were addressed”. All of this (and more) for just asking the ONE previously stated question. They have taken the art of lying to another level.
Of course there was not a name of who to contact, other than Customer Service.
Upon receiving an alert from one of my credit card companies…I found BoA had reported that I was “disputing amount owed” concerning my mortgage obligation with BoA. In addition to BoA now claiming that I have been late on my payments for several months. All of which I can disprove with cancelled checks, bank statements and copies of certified mail return receipt documents (yes, I have had to resort to these measures and paying more to be sure they get my payment).
The problem now is my FICO score has taken a huge hit (high of 780’s to a low of 680’s) all without having taken on ANY new debt or being late on any bill I am responsible for.
The final straw is being told I am not being considered for future job I am seeking to attain once my rehabilitation from shoulder replacement surgery is completed. Potential company’s policy states my credit is considered extremely important for my employment.
So, now what am I expected to do??? Do you think this is all partly to do with my request for consideration of a loan modification? I have spent past 10 mos. trying to get an answer…nothing but extend and pretend (anyone who has attempted knows what I am talking about) and all the while wrecking your credit so it is almost impossible to get a job. Wouldn’t surprise me if BoA states reason for my denial for a mod will be because of low credit scores. As I have stated before…BoA will NOT foreclose on me. I will go to short sale before that happens. How and why they are doing the things that they have is beyond me, as I have ALWAYS paid them every month and on time. Even though my income for the past 13 mos. has been about 1/3 of what is was when I had work and was not injured. I am the one who has been responsible. It is unfortunate that I cannot say the same for BoA. PITIFUL   just PITIFUL!!!!

Bank Whistle Blower

Jan. 6, 2011, 7:43 p.m.

Ever wonder why we don’t hear from bank whistle blowers given all the fraud in the banking and mortgage markets?
 
Bank whistle blowers are routinely silenced, law enforcement doesn’t help them.  Major media outlets don’t cover these stories out of fear of loosing advertising revenues.
 
See: http://www.reportingwrongdoing.com/help-a-whistleblower.html
and
http://www.reportingwrongdoing.com/ReportingWrong-Nov-22-2010-01.pdf
 
Reporting Wrongdoing Should NOT Ruin Your Life!

Just curious, but if a consumer suffers a “hit” to their credit scored reputation, why not sue the party that caused the harm?  Don’t we still have civil laws in place that provide a remedy for wrongdoing?

Parallel Foreclosure

Jan. 6, 2011, 7:50 p.m.

Good question Tom!

I have wrapped together many horrible aspects of HAMP into one article on my parallel foreclosure blog.

It is called, Is the US government using HAMP to swindle homeowners out of homes?

http://parallelforeclosure.blogspot.com/2011/01/us-government-may-be-using-hamp-to.html

@Tom Key
If only it were that easy…see the problem is they have a generally speaking functioning system to correct errors and inaccuracies. If you did sue you would to incur extra costs most of us can’t soldier in these rough times and there is chance that someone at some point will say you didn’t do enough thru the regular channels.

I have complained to the relevant governement agency before and just did it again today. Hopefully this time i get an answer.

Now I’ve heard of credit reporting problems that needed special attention to get fixed. Problem is nobody knows how to trigger that special attention.

Parallel Foreclosure

Jan. 6, 2011, 10:18 p.m.

I believe the Foreclosure Tide could turn in favor of the homeowners. Here is an article I wrote about the actions both individuals and states are taking to force the reluctant bankers to mediate before foreclosing.

http://www.swarmthebanks.blogspot.com/2011/01/foreclosure-mediation-being-forced-down.html

Is HAMP a government program that swindles homeowners out of their homes?
http://www.parallelforeclosure.blogspot.com/2011/01/us-government-may-be-using-hamp-to.html

With all due respect Ms. Wang, I feel the wording in your headline is incorrect (specifically in my case) as per Webster’s definition: “a deviation from accuracy or correctness;mistake”. BoA did this to me intentionally for the purpose of ruining my credit, so as to hinder me from obtaining a loan modification or refinance with another institution. In addition to making it difficult for me to obtain gainful employment (which in at least one instance I am positive of) knowing that without I will eventually not be able to meet my mortgage obligation to them. They have already depleted my savings and checking accounts in the past 13 months by essentially ignoring my repeated requests to at least consider my loan modification. I am about as prime an example of their dishonest and downright dispicable behavior next to those who have already been tossed from their homes or illegally foreclosed upon. ERROR does not fit…anymore than witnessing their blatant lies to our elected officials while under oath. I am just ONE person…but I WILL fight this if it goes to my final breath. GOD as my witness I will!

Parallel Foreclosure

Jan. 7, 2011, 3:11 a.m.

Hi Roy, if it is ok with Propublica, you are welcome to write an article for either http://www.swarmthebanks.com or http://www.parallelforeclosure.com

Roy hits on a very good point. Banks know what actions they take that affect your credit score or at least you hope they know. If they put you in a status that hurts your credit core it is because it is either a mistake or their policy to do this so as to put the consumer in a corner. Hard to go anywhere else while your credit score is in shambles due to the banks convenient mistake.

Like when my student loan that was previously reported dropped off my reports…I’m still paying on it but not getting credited for my good payment history on a loan i will be paying on for the next 10 years. It was there for a year, now it isn’t and apparently hasn’t been sine 2007. nothing I did would take it off and the bank says their system shows it being reported but an Experian rep says they see the account de-listed at the request of citibank. Trans-Union pretty much tells me to bark up Citibank’s tree because if they don’t see it then Citibank isn’t reporting it. When I call Citibank they say “we show it reporting. Funny thing is I got Equifax to show it…don’t know what I did but apparently Citibank Fixed it but they won’t own up to fixing the other 2.

TBH I’ll avoid the Big Banks like the plague from now on. Do business with smaller banks. At least if a small bank screws up you can go to their building and bark to their face.

After speaking to other people that are dealing with this issue my question is “Could filing bankruptcy be all that bad”! I really don’t know alot about bankruptcy or foreclosure but I am really trying to educate myself. Several people I know have filed bankruptcy and it seems to have given them a sense of relief and allowed them to move on. Their credit was already damaged due to falling behind.  My sister was ill for several years and had an astronomical amount of hospital bills. Her and her husband filed and I have to say after harassing collection calls a mailbox full of bills etc.. at least before she suffered a massive heart attacked & passed away she had a few years of peace and a sense of calm. I see high power companies, actors,actresses etc… filing bankruptcy after making millions. Now it is even hard to get a job you may be completely qualified for because companies pull your credit report and determine your fate from it.The employers never asked WHY your credit is in the state it is in. Your resume just gets tossed. With identity theft at an all time high I think many people struggle with the credit bureaus in the same fashion as dealing with the banks like Yes I understand bankruptcy can hurt you as far as interest rates major purchases car insurance etc… I just seems to me that banks and credit bureaus are almost like one in the same. The fight is debilitating.

@AdriAnne
People can recover from BK. The key is that you have to accept that in exchange for starting over you will have to deal with bad credit..lots of denials, higher interest rates and people trying to take advantage of your situation. It can be the best solution and where you are ultimately headed but it fades away after 10 years and you can survive it. I wouldn’t take it lightly but talking to people who filed about their experience and how their credit recovered is very important.

One key thing is, if you do file…continue to use credit…after 3 years you can regain quite a bit of your credit score but the bk accounts and the bk itself will cause you to be denied credit in lots of places. apply for credit sparingly and accept that this is a long term project. so plan for the long term. i could go on and on….

@AdriAnne
Also, try to keep as many of your pre-bk accounts open and in good standing as those will help your score a great deal over time. Also it looks better if you are never late before filing…so at least pay the minimums. try to keep your oldest credit cards around.
if you have the time and the funds try to consolidate balances from your older to the newer cards you have and paying off some cards. example…card with 19% apr that you opened 2 years ago is not as valuable to your credit history and financial well being post bk. A card with a 10% APR that you opened 1 year ago or 3 years ago is more valuable because if it’s older your credit score benefits and if it’s younger you benefit financially post bk whenever you use it. Consolidating small balances into the cards you’ll get rid off is also a great idea. Less pain on your credit score after 3 years to have just the bk public record and 3 credit cards filed under bk and 5 credit cards you left open by using above startegies… versus the bk and say 8 credits cards that were filed under it.

see after a few years the cards you filed on your bk don’t affect your score much. strategically keeping the right accounts good and empty will speed up your recovery.

and yes i could continue to go on and on with this subject.

@Parallel Foreclosure-I am sorry, but I do not understand the necessity of ProPublica’s permission. Could you please explain?

adrianne, haven’t heard from you for a while.where are you with mod

Now Bank of America intends to begin charging people for their checking accounts.  This will be another tax on the poor who are already paying high fees for returned checks, etc.  They will pay off their government sponsored (tax payer funded) bailout with more money from the taxpayers through levies on their checking and savings accounts.  It’s time you closed your bank of America and Merrill Lynch account and moved your money to a local credit union.  Let BOA eat all of those bank buildings they built during the boom years.

I suggest everyone check out the Move Your Money campaign at   http://moveyourmoneyproject.org/

Then move all your accounts and credit cards to a community bank or credit union.  If everyone starts leaving the big banks it will eventually cost them money.

I would also suggest those of you having problems getting errors fixed contact your State Attorney General.  Hopefully the new Consumer Credit Dept. headed by Elizabeth Warren will help.

William Robertson

Jan. 11, 2011, 6 a.m.

Indeed, a lot of consumers suffer from the bank mistakes, moreover, some banks cheat the clients, like Bank of America, for example, that provided mortgage loan modification program which was initially knavish. A lot of people went on paying off their home loans and lost their money. However, it’s pleasant to know that this bank is now accused, though, I’m not sure that people will be able to get their money back.
I have read about it here http://consolidatedebtsloans.com/bank-of-america-loan-modifications-in-arisona/

I’ve been trying to leave my big bank for a while but wife won’t go along with it. not until they stick it to her real good.

We got a loan modification about a year ago . We were on the trail payment for about a year and three months ago Bank of America told us that our first payment was due on march 2011. That our trail payments cover our mortgage until march 2011. That we didn’t have to pay Nov, Dec,Jan. We have documents stating this..We call Bank America and they told us the same thing. My husband check our mortgage status and it shows that we are Now three months behind and they want the money for the last three months, after they told us and verified the documents we got in the mail were correct.My husband called Bank of America and asked them what is going on? they told him they have made a mistake on there side . I am so upset because we could lose our home. We don’t know what to do… I need some advice.:(

BoA should eat that cost. You did your due diligence by contacting them and making sure they were right…until they turn around and say they were wrong.

tbh I would walk away. You can buy another house. It just isn’t worth the stress to deal with these big banks.

What about using the Congressional Findings of the Financial Collapse Commission?

The Findings clearly show that the Lending Industry was lying to the homeowner-borrowers.  The Findings are EVIDENCE.  I realize my suggestion may not “save” your home, but homeowners should insist on communicating with a lawyer representing the lender—explain that any other non-lawyer is practicing law without a license on behalf of a corporate entity.  And submit the Congressional Findings as PROOF to these Lenders of their fraud.

Fraud by one party in making a loan justifies nonperformance of the loan.  Insist that the servicing bank show you that they hold the NOTE, not just the Deed of Trust. 

It’s true that most homeowners cannot afford lawyers, but if ten thousand homeowners INSISTED that the nonlawyer bank clerks are illegally practicing law by claiming that the obligation is DUE (without a Note and with fraud in the inducement), then it might bring the bankers into the light.

Loan Modification remains the best of the bad alternatives for everyone.

Back to the Commission:  Phil Angelides worked very closely with the nine other bipartisan members of the panel investigating the causes of the Financial Crisis. The sudden minority “dissent” suddenly sought to delay the report until after the elections, and now appears with language taken directly from lobbyists for the culpable institutions. The dissent frankly proves that the Commission with its public hearings and large number of experienced witnesses and participants gave them every opportunity to present their case.

Of particular interest is the “dissenter” who dissented from the other dissenters. Representative Wallison is an interesting Boehner appointment to the Commission. He is the lawyer who helped author the “deregulation of financial services” that eventually became law in 1999. Now, Wallison is blaming the 40 million homeowners who manipulated the equity in their homes and cheated those poor bankers who were finally provided the opportunity to pillage their own institutions. Does it make sense to blame homeowners who were subjected to intense marketing of OptionARM terms that even the bankers cannot calculate?

Look who Wallison is:

# 1981-1985 General Counsel for the Department of the Treasury, under Don Regan. Early in his tenure he supervised the preparation of the report on the Secret Service and the Reagan assassination attempt in 1981. He was important in developing Reagan administration proposals to deregulate financial services that, with some changes, became law in 1999.

# 1986-1987 White House Counsel to President of the United States Ronald Reagan. In the aftermath of the Iran Contra affair he came under investigation by Lawrence E. Walsh but was not indicted. (He believes his diary [[ !!!!! ]] persuaded the independent counsel that he had not manipulated the President’s testimony.)

# 1999–present American Enterprise Institute, codirector of AEI’s financial markets deregulation project

Parallel Foreclosure

Jan. 28, 2011, 4:10 a.m.

Hi Roy, I just did not want to raid another websites contributors. I hope you were not offended.

@Parallel Foreclosure-Brother,please be assured that you did not offend me. I was confused as to the “permission” part of your post. At some point in time I WILL write my entire story of my endeavors concerning my efforts to procure a loan mod via HAMP with my friends at BoA. Recent developments these past few weeks have now required me to begin a new approach, as it has become evident BoA has never had any intention of modifying my loan. They aren’t even able to get their story straight. My 3rd party guy was told I had been offered a mod, but that I had refused. Then I was told I hadn’t showed proof of income…Because of shoulder replacement surgery I am receiving disability. They have all the proof required according to HUD/Hamp personnel (I sent letters from my physicians, work comp lawyer, pay schedule and check stubs from work comp carrier and bank statements showing deposits made). My major concern now is to put considerable more effort in my rehab…as I only have a 4month window to achieve my range of motion (surgeon told me yesterday that after 4 months it will be what it is). At this time, with all the info I have gathered (interesting how the banks will not allow being recorded…nothing wrong with someone else listening to conversation, especially someone whose word in court would not in any way be questioned as to their former line of work) I have no other alternative but to file suit. I feel a judge will give my predicament a much better chance for a fair result. I have been lied to enough…along with credit fraudulently being destroyed and the implications/ability of employment harmed (an entirely different suit) it is time to address and as BoA always says “move forward”. To be continued…

My problem is with Pacific Capital Bancorp not properly amortizing my SBA loan!  This is seen at http://www.pacificcapitalbankquestions.com   

Is it legal for SBA banks to charge you more, then they are allowed?  I have turned them into the OCC and also set up a website http://www.occquestions.com as Pacific Capital Bank wil not as
Answer my questions asked of them since 2007!

Amazing information.  I know that when a consumers trys to go through a <a >consolidate debt program</a> the balances minimums, and fees go down dramatically!  Staying away from settlement and other programs should be done tho

Oceano Nursery

Dec. 14, 2011, 11:05 p.m.

Santa Barbara Bank & Trust has fraudently claimed $45,17120 owed SBBT that they show inTheir own records is not owed.  http://www.sbaplploans.com shows the full story with this fraud.

I too, a former Countrywide customer, found myself caught up in the Bank of America “loan modification” mess after their customer service representative refused my payment in July 2009. I have a file folder three inches thick with documentation of the nightmare I went through with these people. Though I am paid-to-date and always paid as agreed, my credit is ruined. Is there any way to repair the ONE bad creditor on my report? I appreciate any information that can assist me in clearing my name.  Thank you.

Bank of American changes customers banking settings without informing its customer.  Resulting could be a devastating credit damaging!

When I use my Bank of American credit card to shop and think the amounts of charge will always automatically withdraw from our saving account and check account,  which set up at the time we open a Bank of American Credit Card account during a visit to a local branch. What we did not know is that the settings reset to null each year and all bills are coming by email and we did not pay attention.  When we got a letter from Bank of American by July, we realized that we have got bills piled up unpaid over the months and penalty bill and late fees with high interest rates. Worst of all it damaged of our credit from almost to 900 to now under 700. 

Watching out what Bank of American can do to you!

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