Fair Credit Reporting Act (FCRA) FAQ
- Why did I get a letter from CMG Mortgage Insurance Company (CMG MI) 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 the Credit Union's mortgage insurance rate to be higher?
- Who is CMG MI?
- What is mortgage guaranty insurance (MI)?
- Why is MI needed?
- Who pays for MI?
- How much does MI cost?
- How much of the Credit Union’s costs for MI is the Credit Union passing on to me?
- How do MI companies set rates?
- Do all mortgage insurers charge the same rates?
- When can MI be cancelled?
- Why didn’t I get the letter on my credit report information from my Credit Union?
- Why didn’t my Credit Union 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?
- Why did I get this letter when I never got a mortgage?
- I pay my bills on time and I have never been penalized due to my credit history. Why is your MI company not offering the Credit Union the best available rate?
- Did I have a choice on the MI company?
- Can I remove one of the borrowers that had the lower credit score?
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Why did I get a letter from CMG Mortgage Insurance Company (CMG MI) regarding "adverse action"?
You recently applied for a mortgage loan and your Credit Union has applied to CMG MI for mortgage guaranty insurance (MI) on that loan. CMG MI has agreed to provide your Credit Union 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.
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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. Generally, 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.
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What is a credit score? Is it the same as FICO®?
A credit score is a numerical index that represents an estimate of an individual's financial creditworthiness (e.g., the likelihood that credit users will pay their bills). 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 formulas developed by the Fair Isaac Corporation. FICO scores and their variants are designed to measure the risk of default on a credit obligation 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.
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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.
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How has my credit report information caused the Credit Union’s mortgage insurance (MI) 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. CMG MI determined the Credit Union’s MI rate for your mortgage loan 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.
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Who is CMG MI?
CMG Mortgage Insurance Company (CMG MI) provides private mortgage guaranty insurance to Credit Unions. For more information, visit www.cmgmi.com.
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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. Most lenders require MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
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Why is MI needed?
Studies show that homeowners with less than 20 percent invested in a home are more likely to default, making low-down-payment mortgages more risky for lenders and investors. For this reason, lenders and investors generally require MI for loans with down payments of less than 20 percent.
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Who pays for MI?
The Credit Union is the owner and beneficiary of the MI policy. The Credit Union pays the MI premium. However, with traditional MI products, the Credit Union’s cost for MI may be passed on by the Credit Union to the Member by the Credit Union adding it to the monthly principal and interest payment. For other types of MI products, the premium charges may be passed on by the Credit Union to the Member through increases by the Credit Union 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 Credit Union to the Member is a matter between the Credit Union and the borrower, and is entirely out of CMG MI’s control.
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How much does MI cost?
Premium prices vary. They are based on the size of the down payment, type of mortgage, borrower credit history and amount of insurance coverage.
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How much of the Credit Union's costs for MI is the Credit Union passing on to me?
Contact your lender for information about the amount you are paying for MI coverage or refer to your Truth in Lending Statement provided to you by your Credit Union.
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How do 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.
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Do all mortgage insurers charge the same rates?
We cannot comment on other insurers’ rates. The rates for all insurers are filed with the state insurance departments and are generally available for review upon request to the insurance department.
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When can MI be cancelled?
In many cases, MI may be cancelled 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 cancellable once the borrower has built up enough equity and is current on mortgage payments. CMG MI 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.
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Why didn’t I get the letter on my credit report information from my Credit Union?
This letter provides notice regarding the impact of your credit report information on the pricing of the Credit Union’s 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.
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Why didn’t my Credit Union tell me about this?
We are unaware of your Credit Union's specific procedures, so we cannot comment on any notices or other information provided to you by your lender. We can tell you that 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 provided by the consumer reporting agency listed in your letter, the rate that we will charge the Credit Union for the MI will be higher than our lowest rate available for the applicable insurance program. Case law interpreting FCRA suggests that charging this higher rate for the MI provided to your Credit Union in connection with your mortgage loan requires that you receive an adverse action notice.
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Why did I find out about this after the transaction closed? Can I do anything about this?
MI is requested and purchased by lenders in the course of processing a loan application. CMG MI initiated this notice as soon as practicable after your Credit Union committed to purchasing MI from CMG MI. We recommend that you contact your lender for more information.
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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 CMG MI.
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Why did I get this letter when I never got a mortgage?
The fact that the loan for which you applied did not close may not affect the obligation to provide notice with respect to the action we took. The notice you received simply reflects that the manner in which CMG MI priced the MI it offered to your Credit Union could be considered an "adverse action" with respect to you.
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I pay my bills on time and I have never been penalized due to my credit history. Why is your MI company not offering the Credit Union the best available rate?
CMG MI sets the rate for our insurance issued to your Credit Union 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 CMG MI 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.
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Did I have a choice on the MI company?
Because MI is purchased by the Credit Union to protect itself against a possible loss on the loan, the MI company is generally selected by the Credit Union, not the member.
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Can I remove one of the borrowers that had the lower credit score?
You should discuss this with your Credit Union. CMG MI merely sets the price for mortgage guaranty insurance based on borrower information provided to us by your Credit Union.
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