Mortgage companies that sell loans to the government-sponsored enterprises will be reminded of their obligations to ensure the accuracy of credit report data after Equifax revealed a coding error that affected credit score calculation.
It was discovered in a legacy, on-premises server that contained data slated to be migrated to the new Equifax cloud infrastructure, a statement from the company said.
"This issue, which was in place over a period of a few weeks, may have resulted in the potential miscalculation of certain attributes used in model calculations," the statement said. "Our analysis indicates that there was no shift in the vast majority of scores during the timeframe of the coding issue."
The error affected 12% of the credit scores calculated based on Equifax data issued between March 17 and April 6. Equifax notified its customers and credit report resellers and said it is working with individual organizations on analysis. But the onus is on lenders to fix loan applications with any misinformation resulting from the Equifax error.
"When there is documented evidence of material erroneous credit data, the underwriter should work with the credit repository to correct the data and resubmit the loan casefile to [Desktop Underwriter] for underwriting," a Fannie Mae announcement said. "If there is not enough time to obtain corrected information, or if there are extenuating circumstances that contributed to the derogatory credit, the lender may manually underwrite the mortgage."
Similarly, any application in progress being underwritten through Freddie Mac's Loan Product Advisor with an error must be resubmitted with an updated credit report.
"If the mortgage cannot be resubmitted to LPA for any reason, it must be manually underwritten and is considered a non-LPA mortgage," Freddie Mac's announcement said.
Both companies said originators need to direct all questions about the coding error and its impacts to Equifax. The GSEs' regulator, the Federal Housing Finance Agency, is working with Fannie Mae and Freddie Mac to identify any impacts.
Mortgages containing erroneous information that have already been sold to one of the GSEs must be reported and corrected as well.
"The seller must use the Freddie Mac Post-Fund Data Correction process to correct the delivered credit score for a borrower impacted by the Equifax coding error," the announcement said, noting all such findings are covered by a life-of-loan representation and warranty for data inaccuracies.
Fannie Mae has a similar process for handling loans it already purchased. "For errors that are the result of reporting errors by the credit agency, lenders must take action when information not considered by DU would result in a recommendation other than that returned by DU," its notice said.
"We were notified about a potential issue with a date calculation in Equifax's online server," a FICO statement said. "We are working with Equifax to understand more and any impacts. However, the issue was an Equifax issue and not a FICO issue or an issue with the FICO Score algorithm."
Credit scores are also used in the origination of Federal Housing Administration-insured mortgages. “We are aware of the Equifax issue, and while we are doing preliminary analysis of the potential impacts, it is too early to tell if this issue will have an impact on future FHA originations,” a statement from the Department of Housing and Urban Development said.
Could this error end up hitting Equifax in the wallet? Possibly, although probably not to the tune of the
Meanwhile, complaints to the Consumer Financial Protection Bureau about credit reporting
