Short Sale Reported Incorrectly???

[Anonymous]

My wife and I closed on a short sale in August of 2017.  Our bank agreed to absorb all costs in the sale, short of around $1400 which we paid.  Following the closing, we were to be done and free, minus the obvious credit hit.

I pulled my credit reports today and they still show our mortgage account with the bank as open, with the full balance of the remaining mortgage plus the missed payments (which they required to even consider a short sale).  The status is "open" and "120+ days overdue".  It looks like the bank simply just stopped reporting after the closing date.  My questions are, shouldn't this account be shown as closed and "paid as agreed", or something along those lines?  If so, should this be disputed?  If it is left how it is, how will that affect applying for another mortgage in the future?

Our credit scores are actually surprisingly high considering, but I'm wondering if that is partially because the mortgage account was never closed.

[iv]

Well, reporting it as open is definitely wrong.

But you won't get a "paid as agreed" out of this - the status should end up as "settled for less than full amount due" or similar wording.

Whether that's better or worse for your scores than it reporting open with 120+ lates... no idea.

Either way, you have a waiting period for most mortgage types with either the 120+ day lates or the settlement showing - how long can vary based on the type of new mortgage, downpayment amount, and reason for the short sale.

[Anonymous]

Thank you for your quick response.  "settled for less than full amount due" makes a lot more sense!

I spoke with a lender that said since it has been over a year since the closing, and our credit scores are over 700 (750-770 on TU and Equifax, only ones the bank reported to), he may be able to make a loan work for us.  He wants us to submit our info to go to his underwriter to see if they can in fact make it work.  This will be a hard inquiry.  I talked to him before I realized this incorrect status, and not sure what to do I guess.  Wondering if it's worth submitting to his underwriter and getting the hard inquiry at this time with the account showing as open with a balance of almost $200k.

Not sure if this should be in the Morgage Loans section...

[iv]

Yeah, I'd suggest a new post over in Mortgage Loans - describe your full situation, and ask the LOs there for what loan options there are for you 1 year after the short sale.

One thing to watch out for when attempting to correct the reporting of the closed loan - make sure that they don't mark it as settled on the date you disputed it! They should report the actual settlement date of a year ago.

[Anonymous]

Thanks for your input! I will do that at the mortgage section.

And yeah, that would not be helpful if they tried to put the date they fixed it!

[AndySoCal]

Usually the short sales report with a remark settled account legally paid for less than full balance ( verbiage close to it). The balance should be zero with no late payments after the settled date.

[RobertEG]

Update is not optional on the part of the lendor, so yes, you can dispute to have the current status updated to non-delinquency status of settled for less or its equivalent for a short-sale, AND also that the account is Closed with a current balance of $0.

FCRA 623(a)(2) requires that a party who has furnished information to a CRA must "promptly" update that reporting so as to maintain its current accuracy.  "Promptly" is generally interpreted as updated in their next regular account reporting cycle.  More than two reporting cycles without update is clearly not in compliance with FCRA 623(a)(2), and thus basis for a dispute or formal complaint with the CFPB.

As an aside, the common creidt reporting manual used by the big-3 CRAs, titled the Credit Reporting Resource Guide, provides for the reporting of a short-sale when the deficiency balance has been paid as having a current status of paid, and a current balance of $0.

The fact that a deficiency occurs based on a short sale can be reported by adding a special comment CM (collateral released by creditor/balance remaining) while the deficiency remains unpaid, but the special comment CM is discontinued once the consumer pays the deficiency, and the balance must also be updated to $0.

The creditor is clearly not in compliance with the specific reporting instructions for short-sales, as detailed in FAQ 52 in the Credit Reporting REsource Guide.  The account should show paid, closed, $0 balance without any continued reference to the short sale once it has been paid.

Reference Frequenctly Asked Question No. 52 in your dispute, which is basis for required correction per explicit CRA policy.

[Anonymous]

Thank you for the explanation! I'm going to jump the gun here a little bit with this question. If I submit a dispute and the bank doesn't respond in a timely manner (completely possible with them), is it possible to get it deleted from my credit report altogether?

[RobertEG]

In any dispute, the CRA will correct the asserted inaccuracy if their reinvestigation finds that your dispute provides the accurate information.

Deletion is only mandated if the disputed information is not either verified or cannot be corrected.

The CRA, via its reinvestigation authority, makes the final decision regarding the verification, correction, or deletion of disputed information.  The CRA must consider the response from the furnisher, but the furnisher results do not establish the outcome of the dispute.

The CRA reinvestigation is the final determination.

If the furnisher verifies, the CRA usually has no independent basis for find otherwise, so their reinvestigation will normally "rubber stamp" the advisement of the furnisher.

However, in your specific case, the facts would provide CRA basis for their own finding of complaince with thier own reporting manual, regardless of response or lack thereof from the furnsher.

Your dispute will cite what the accurate reporting should be, per CRA policy.

Thus, the outcome should be that the CRA corrects per their own policy, and should not be deletion of the entire account based on inaccuracy in only certain correctible information.

No, deletion is not required even if the crditor fails to respond.

However, it is always possible that, once the creditor receives a copy of the dispute from the CRA, that they will decide to simply report deletion of their entire account to make you go away.  If they voluntarily decide to delete their entire account, any pending or future dispute is then rendered moot, as a dispute only relates to the accuracy of information in your file, and not to delted information.

[Anonymous]

Ok, that makes sense. Thank you for explaining everything very clearly. Much appreciated.