Fair Credit Reporting Act (FCRA) FAQ

Why did I get a letter from CMG Mortgage Insurance Company (CMG) 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 CMG?
What is mortgage guaranty insurance (MI)?
Why is MI needed?
How does MI benefit me?
Who pays for MI?
How much does MI cost?
How much am I paying for MI?
How do MI companies set rates?
Do all mortgage insurers charge the same rates?
When can MI be cancelled?
How do I cancel the 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?
Why did I get this letter when I never got a mortgage?
How was CMG able to pull my credit report without my permission?
I pay my bills on time and I have never been penalized due to my credit history. Why is your MI company not offering me the best available rate?
How much more did I pay because of my credit score?
Did I have a choice on a MI company?
Can I remove one of the borrowers that had the lower credit scores?

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If you have other questions or concerns, please feel free to contact your CMG MI Account Executive, or call CMG Mortgage Insurance at (800) 909-4264.



Fair Credit Reporting Act FAQ 

Why did I get a letter from CMG Mortgage Insurance Company (CMG) regarding “adverse action”?
You recently applied for a mortgage loan and your lender has applied to CMG for mortgage guaranty insurance (MI) on that loan. CMG has agreed to provide your lender with MI and in order to do so, utilized your credit report information in determining the MI rate on your loan. Based on such review, the rate we will charge for the MI 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. Users must also identify the company that provided the report, so that the accuracy and completeness of the report may be verified or contested by the consumer.

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 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. CMG determined 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?
CMG is a joint venture between PMI Mortgage Insurance Co. and the CUNA Mutual Group and is solely dedicated to meeting the credit enhancement needs of Credit Unions throughout the United States. 


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 down payment 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 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. 


How does MI benefit me?
MI can make it possible for you to buy a house with a low down payment, allowing you to purchase a home sooner than you would have been able to if you had to accumulate a larger down payment:

	If you're a first-time buyer, MI can help you get over the biggest hurdle to homeownership -- coming up with the traditional 20 % down payment.
	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.

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Who pays for 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 CMG’s control. 


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. 


How much am I paying for 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 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.


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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 you have built up enough equity and are current on your mortgage payments. CMG 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 MI once it is in place?
You should contact your lender or your lender’s servicer. CMG 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 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 provided by the consumer reporting agency listed in your letter, the rate that we will charge for the 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.
 

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Why did I find out about this after the transaction closed? Can I do anything about this?
MI is requested by lenders in the course of processing a loan application. CMG initiated this notice as soon as practicable after your lender committed to securing MI from CMG. 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 CMG. 


Why did I get this letter when I never got a mortgage?
The fact that the loan for which you applied did not close does 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 priced the MI it offered to your lender could be considered an “adverse action” with respect to you.


How was CMG able to pull my credit report without my permission?
Under the FCRA, CMG has permissible purposes to obtain consumer reports in connection with the underwriting of mortgage insurance for lenders as part of credit transactions involving the consumers to whom the reports relate. 


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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 me the best available rate?
CMG 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 CMG 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.


How much more did I pay because of my credit score?
Without knowing the details of your specific loan program, it is not possible for CMG to determine how the rate we charge your lender would have changed had you had a different credit score.


Did I have a choice on a 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. CMG merely sets the price for MI based on borrower information provided to us by your lender.


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If you have other questions or concerns, please feel free to contact your CMG MI Account Executive, or call CMG Mortgage Insurance Company at (800) 909-4264.