Broker Pulling Credit Advice! - Posted by Ben

Posted by Ben on March 26, 2008 at 03:38:30:

Thanks - advice well-taken!

Broker Pulling Credit Advice! - Posted by Ben

Posted by Ben on March 25, 2008 at 02:46:15:

As a note broker, I know I can/should pull credit on a potential deal, even before I give over to an investor for his/her quote. What would be the best company to do that through? As a part-time person, I don’t have an office per se, and, of course, no license b/c it’s not required. Mortgage brokers have a number of companies and sources they can use…but how about note/cashflow brokers?? Thanks for quick advice - I have deals in the pipeline.

Re: Broker Pulling Credit Advice! - Posted by John Behle

Posted by John Behle on March 27, 2008 at 10:54:36:

Over the years I have either obtained credit reports through mortgage companies that I work with or a direct tie in to a credit report provider. For me, it has always been a simple matter because I am an end buyer. There’s no question as to whether I have a right to or run any risk. I do have the right.

For a note broker, it is different and I suggest Michael’s advice is probably the way to go. Align yourself with a funding source or two that can help you with pulling the credit reports.

Re: What’s The Score? - Posted by David Butler

Posted by David Butler on March 26, 2008 at 09:17:02:

Hello Ben,

Glad I caught this before heading to the airport (for the 10th Creative Real Estate Online Convention) here in a bit! Also spotted the very nice email you sent to me privately. Much appreciated. Hope things are going great out your way (Indianapolis area these days, wasn’t it?).

Okay… to add to what Mike mentioned here:

It is helpful to understand the rights you may have to obtain credit, and the source of those rights. Like many government agency employees, we frequently encounter credit bureau employees who are not completely familiar with these rights, as they pertain to us as note brokers and/or note investors. The process does not always go smoothly for all people, in all places. We’ve had to devote time in the past to train students on simply learning the particulars of what it is they are trying to do, and then practicing in their areas by making phone calls to as many bureaus as they have access too. The results are not too surprising most of the time.

In general, it seems to take three or four calls for the average note finder to make their point, and find a bureau that will work with them. Even then, some of them have tried to establish the same rules and regs as they do for mortgage brokers - as you have alluded to here.

At the risk of being redundant, here is the most relevant basis for our right to have access to a Payor’s credit report. Knowing this bit of information, and polishing your ability to discuss it with a senior management person at your local credit bureau(s) goes a long way in helping to establish a basis for opening an account with your local credit bureau for the purposes of pulling credit.

FCRA Section 604(a) of (15 USC Section 1681B) states:

Subject to subsection (c), any consumer reporting agency may furnish a
consumer report under the following circumstances and no other:

(2) In accordance with the written instructions of the consumer to whom it relates.
(3) To a person which it has reason to believe:

(A) intends to use the information in connection with a credit transaction
involving the consumer on whom the information is to be furnished and
involving the extension of credit to, or review or collection of an account
of, the consumer; or

(E) intends to use the information, as a potential investor or servicer, in connection
with a valuation of, or an assessment of the credit or prepayment risks associated
with an existing credit obligation; or

(F) otherwise has a legitimate business need for the information:

(i) in connection with a business transaction that is initiated by the consumer; or
(ii) to review an account to determine whether the consumer continues to meet
the terms of the account.

To help augment the argument, it is most helpful to explain that you will be:

  1. presenting a signed authorization from the note holder for the purpose of pulling credit; and
  2. providing a copy of the debt obligation between the Payor and the note holder or his assigns.

This may require a trip to your local bureau to personally meet. It may require nothing more than explaining the process, or providing the two items above for a few transactions before they eventually don’t worry about you providing that documentation anymore. But I would still require the signed authorization to have in file.

That being said… I have long been a proponent, and teach my preference to have the seller provide credit… for several reasons, the most important being that I want some kind of psychological commitment from a seller before devoting my time to his note(s). This is particularly so if I am operating as a note broker. I have students who feel more comfortable pulling credit when necessary, but I believe that process more often turns out to be counterproductive. As investors or brokers… Nobody pays us to shop for quotes. We only get paid for closing notes.

Hope that helps, and my continued best wishes for your success.

Have Fun For A Living

David P. Butler

Payor credit wise to check… - Posted by Michael Morrongiello

Posted by Michael Morrongiello on March 25, 2008 at 12:41:25:

You are on the right track…so many deals are mispriced because they are simply “quoted” assuming acceptable credit or good credit when in reality over 80% of the time the payor credit is NOT what was represented or assumed.

Note sellers are often remiss in checking or confirming the credit backgrounds of the Note payors and to top that off - Credit profiles CHANGE- they are not static but subject to change and often.

We were structuring a new sale involving seller financing a few months back where at the time of submission the proposed payors credit scores were 685 (their middle credit score). A month + plus later when they were finally ready to proceed forward their scores had now dropped significantly by over 50 points to the 630+ level. Thus the PRIOR pricing offerred was no longer valid

A review of the payors CURRENT credit is VITAL to accurately assessing risk and pricing files.

To be able to run credit on a regular basis you need to get set up with a vendor. The problem is most vendors are concerned about taking on new clients who do not hold licenses, are actually in the mortgage origination or property management business, and / or who do not have a distinct office location.

Recognize that these days to run a “Tri Merge” credit report may run between $12 to $20 per inquiry!

As an alternative align yourself with a competent Note funder who can also provide this service to you while pricing deals as well.

Best to your success;
Michael Morrongiello
Author of the following home study courses;

Paper Into Cash - The Convertible Currency - How to Effectively Create Marketable Real Estate Notes
The Unity of Real Estate & “Paper” - Advanced techniques for both the acquisition and disposition of properties using Real Estate “paper”