topic Re: Impact of Called Loan on FICO Score in Mortgage Loans

Impact of Called Loan on FICO Score

Anonymous — Fri, 24 Feb 2012 10:02:04 GMT

What impact will lender calling a mortgage have on FICO Score?

Person got new mortgage. Money has changed hands. To make ratios work, he had to pay off all his credit cards - which he did. An additional condition called for borrower to close all credit card accounts.

The papers were signed, money changed hands and borrower now refuses to close the credit card accounts. Lender states they will call loan and demand their money back. If this happens, what happens to borrower's FICO Score?

Re: Impact of Called Loan on FICO Score

boomhower — Fri, 24 Feb 2012 12:00:23 GMT

Does the person have the money to pay?

Re: Impact of Called Loan on FICO Score

Booner72 — Sat, 25 Feb 2012 18:50:24 GMT

Closing happened? The loan was funded? The person got the keys? Boy, I don't think that the lender can do that.

Re: Impact of Called Loan on FICO Score

boomhower — Sun, 26 Feb 2012 01:42:08 GMT

@Booner72 wrote:
Closing happened? The loan was funded? The person got the keys? Boy, I don't think that the lender can do that.

Yeah, they can. If the terms of the loan aren't fullfiled they can call it to be paid. When you sign the loan you agree to certain terms other than the payment, insurance being a biggy. Fail to follow through with those terms and the lender can call the loan. In this case they agreed to close those cards. They failed to abide by terms the money was lent one, they broke the contract. The bank has the right to call the loan since the borrower broke the contract.

Re: Impact of Called Loan on FICO Score

Walt_K — Sun, 26 Feb 2012 03:15:42 GMT

I'm assuming that when they call the loan, if the person can't pay, they'll be in default, mortgage proceedings could be instituted, and it will have a very negative effect on credit. But no experience with this.

Do the loan terms require that no new credit cards are opened? If not, I'd think canceling cards and then opening new ones would be a much better route to take than having this loan called. If credit score is an issue, get a secured card.

Re: Impact of Called Loan on FICO Score

Anonymous — Sun, 26 Feb 2012 03:29:18 GMT

Did they not think the lender was serious?

Re: Impact of Called Loan on FICO Score

Booner72 — Sun, 26 Feb 2012 17:39:53 GMT

Does that mean that the bank wants payment in full, then?

Re: Impact of Called Loan on FICO Score

namvet — Sun, 26 Feb 2012 18:05:37 GMT

@Anonymous wrote:
What impact will lender calling a mortgage have on FICO Score?

Person got new mortgage. Money has changed hands. To make ratios work, he had to pay off all his credit cards - which he did. An additional condition called for borrower to close all credit card accounts.

The papers were signed, money changed hands and borrower now refuses to close the credit card accounts. Lender states they will call loan and demand their money back. If this happens, what happens to borrower's FICO Score?

I spent many years in the mortgage business and have never heard of a lender allowing payment of debts after closing. We always required proof of pay off prior to closing of the loan. Docs would not be drawn if this condition was not satisfied. The lender took the risk and funded the loan so i think the lender may be liable here.

Re: Impact of Called Loan on FICO Score

Anonymous — Sun, 26 Feb 2012 18:16:38 GMT

It doesn't seem that they can change terms after the loan has closed, even if the lender changed after closing. It would have to be terms both parties agreed to prior to closing.

If they have not closed yet, I can see that.

I would suggest a lawyer. Closing those cards can have a significant (negative) impact on the credit score.

Re: Impact of Called Loan on FICO Score

Anonymous — Sun, 26 Feb 2012 19:04:50 GMT

"An additional condition called for borrower to close all credit card accounts."

I don'y beleive that for a minute. Never heard of such a thing.

Re: Impact of Called Loan on FICO Score

StartingOver10 — Sun, 26 Feb 2012 19:34:26 GMT

What kind of loan was this? An equity line by chance?

This used to be a common condition in equity lines.

Is this a private loan or from a local bank?

Re: Impact of Called Loan on FICO Score

Anonymous — Tue, 28 Feb 2012 00:34:33 GMT

Sorry for delay in responding. There was a login problem. MyFICO suddenly discovered they didn't have my SSN.

The loan was with a mortgage company, not directly with a bank. It was being sold to a major national bank who had made it a condition that all credit cards be closed out after closing. Paying off the credit cards to make the ratios work occurred before the closing. Bank buying loan was concerned that credit cards would be used to run up new debt.

My question was specific to impact on FICO score. Borrower did not have the cash to pay off the called loan. Would he be able to borrow to generate the needed cash was my concern. He never missed, or made, a payment. Would a negative impact on his FICO score prevent him from borrowing his way out of this mess?

i've been in the mortgage business since 1985 and have never seen anything like this. I may never know the answer. At the 11th hour the borrower gave in to the banks demands and closed his accounts. He's not saying if he tried to borrow elsewhere.

I may also never know the answer to my original question: How does a lender calling a loan impact on a person's FICO score? Borrower never missed a payment but was considered in default of a condition of the loan approval.