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Free Reports Cause Logjam

Implementation of the new Fair Credit Reporting Act rules, set to start on a regional basis beginning Dec. 1, could have some unintended consequences, a former officer of the National Association of Mortgage Brokers warned here.

Under the revised law, which will be put into effect nationally over a nine-month period, consumers are allowed to request one free credit report annually so they can make sure their files do not contain erroneous information.

While the requirement is a laudable one, Virginia "Ginny" Ferguson, a past vice president of NAMB's board of directors and a previous chair of the group's credit scoring committee, is fearful it "could overload the system."

Considering the fact that 160 million Americans have documented credit information, three million credit reports are pulled each year, and half of all reports result in disputes, Ms. Ferguson said overloading the system with free reports could slow the lending process to a crawl.

The 23-year broker and originator also told the California Association of Mortgage Brokers that she's worried because the free reports will contain a credit score that will almost certainly differ from the one mortgage loan officers get when they pull a client's credit report. It's not a credit score in the traditional sense, she said, and consumers could see a 35-point drop or more if and when they apply for a mortgage.

"It's not a classic credit score that's used by lenders," said the co-owner of Heritage Valley Mortgages, Pleasanton, Calif. "It's not industry-specific. It's not a so-called 'FICO' score."

Ms. Ferguson fears that with "lots of people disputing all over the map," it will not only slow down the process but also "drive up the cost."

"And guess who they are going to blame," she added. "People are going to think we're trying to rip them off."

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