Is it a problem that our mortgage lender doesn’t report to credit bureaus?

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middistancerunner
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Is it a problem that our mortgage lender doesn’t report to credit bureaus?

Post by middistancerunner » Fri Sep 14, 2018 9:03 am

Hi bogleheads,

My partner and I recently purchased a condo (first time home purchase) and had been surprised that the mortgage was not showing up on either of our credit reports yet. I spoke with the lender today (First Republic Bank) and they said they don’t in fact report to credit bureaus.

Is this anything to worry about? My credit score is excellent - I have a handful of credit cards that I got over the years for sign up bonuses and rewards, which I pay in full every month, so it’s around 800. I’ve always thought having a mortgage would raise that number even further but I am also not sure that this would be a meaningful benefit as I don’t have trouble getting approved for credit as it is.

I guess the other question is.... if they don’t report to credit bureaus, what do they do if we fall behind on the mortgage or default? Will they be somehow harsher or more difficult to deal with? We live in a recourse state, but my understanding is it has some extra protections for homeowners (Massachusetts).

Obviously we have no plans to do this, and our mortgage payment is within our means (two earners, and we can pay mortgage and expenses on one income while still saving modestly, which is protective against unemployment downside scenarios).

But I had a really rough growing up, which involved a foreclosure and bankruptcy, so I have a hard time not always running through worst case scenarios in my head. I am very much a worrier financially. Until I have enough money in the bank to cover the mortgage (about $480,000 currently) I won’t feel totally safe. And right now we are far from that.

barnaclebob
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Re: Is it a problem that our mortgage lender doesn’t report to credit bureaus?

Post by barnaclebob » Fri Sep 14, 2018 9:33 am

Does the bank actually own the mortgage note or are they just a servicer? When did you buy the place? It took a few months before my most recent house purchase effected my credit scores but I wasn't actually monitoring my credit report.

middistancerunner
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Re: Is it a problem that our mortgage lender doesn’t report to credit bureaus?

Post by middistancerunner » Fri Sep 14, 2018 9:45 am

barnaclebob wrote:
Fri Sep 14, 2018 9:33 am
Does the bank actually own the mortgage note or are they just a servicer? When did you buy the place? It took a few months before my most recent house purchase effected my credit scores but I wasn't actually monitoring my credit report.
We closed June 1.

I pretty sure they own the note. We pay them by a direct draft between a First Republic checking account and a First Republic mortgage account.

In any case my banker told me today they don’t report to bureaus....

mhalley
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Re: Is it a problem that our mortgage lender doesn’t report to credit bureaus?

Post by mhalley » Fri Sep 14, 2018 12:31 pm

You can still have excellent credit even if you only have credit cards that you pay off monthly. Will the number be as high as it would if they reported the mortgage? Probably not, but it will still be high enough for you to qualify for zero % car loans, best mortgage rate if you move, zero % cc transfers etc.
I’m sure that if you start making late payments they will be happy to report you to the credit bureaus. :beer

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dm200
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Re: Is it a problem that our mortgage lender doesn’t report to credit bureaus?

Post by dm200 » Fri Sep 14, 2018 1:16 pm

Seems to me very, very unusual.

middistancerunner
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Re: Is it a problem that our mortgage lender doesn’t report to credit bureaus?

Post by middistancerunner » Fri Sep 14, 2018 2:08 pm

dm200 wrote:
Fri Sep 14, 2018 1:16 pm
Seems to me very, very unusual.
It’s a kind of unusual small niche bank that caters to ‘high net worth individuals.’ https://www.wsj.com/articles/first-repu ... 1471388308

We are not that, but they have some very favorable subsidized mortgages that we were fortunate to be able to take advantage of.

Not sure why they don’t report to credit bureaus though, and am hopeful someone can shed light on whether there are any downsides other than not getting the credit score boost?

Iridium
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Re: Is it a problem that our mortgage lender doesn’t report to credit bureaus?

Post by Iridium » Fri Sep 14, 2018 2:19 pm

middistancerunner wrote:
Fri Sep 14, 2018 9:03 am
I guess the other question is.... if they don’t report to credit bureaus, what do they do if we fall behind on the mortgage or default? Will they be somehow harsher or more difficult to deal with? We live in a recourse state, but my understanding is it has some extra protections for homeowners (Massachusetts).
The fact that they do not report is unlikely to impact their behavior if you default. Even though THEY do not report, they could still sell your account to a debt collector who does (assuming non-recourse loans are reportable in MA). In general though, it does not do anyone any good to be harsh or difficult to deal with. If you are in a non-recourse underwater loan, getting frustrated and simply walking away is near the worst outcome for the bank, so banks have an incentive to work with borrowers to see what can be done to get the loans back to current. Of course, nothing says that a bank will be competent when suddenly faced with 10x the defaults as they are used to, or that individual collectors won't have a bad day.

When I worked in auto 'loss mitigation', the problems really occurred when the borrower stopped communicating with us, usually by ignoring our calls and letters. I am sure that most Bogleheads, if $50K suddenly disappeared from their brokerage accounts, and kept getting sent to voicemail, would call every day until they heard what was going on. Banks do something similar, but at least at my former employer, once we have someone on the phone, the agents have been trained that more flies are caught with honey than vinegar.

blevine
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Re: Is it a problem that our mortgage lender doesn’t report to credit bureaus?

Post by blevine » Fri Sep 14, 2018 2:26 pm

Who says that if you don't pay, they wont START reporting your loan at that time ?
They can change their minds anytime or may have an undisclosed policy they did no choose to share.

Note that often these free report/score sites tell you what you can do to improve your credit,
they always tell me that my lack of auto or home loan is a problem. I only have credit cards, no other
form of loans. So they are telling me I need some other debt, yet the lender does not have to report it !
Good to know. Not that I was going to take a loan to improve my score...but some might.

middistancerunner
Posts: 141
Joined: Tue Aug 19, 2014 12:02 am

Re: Is it a problem that our mortgage lender doesn’t report to credit bureaus?

Post by middistancerunner » Fri Sep 14, 2018 2:28 pm

Iridium wrote:
Fri Sep 14, 2018 2:19 pm
middistancerunner wrote:
Fri Sep 14, 2018 9:03 am
I guess the other question is.... if they don’t report to credit bureaus, what do they do if we fall behind on the mortgage or default? Will they be somehow harsher or more difficult to deal with? We live in a recourse state, but my understanding is it has some extra protections for homeowners (Massachusetts).
The fact that they do not report is unlikely to impact their behavior if you default. Even though THEY do not report, they could still sell your account to a debt collector who does (assuming non-recourse loans are reportable in MA). In general though, it does not do anyone any good to be harsh or difficult to deal with. If you are in a non-recourse underwater loan, getting frustrated and simply walking away is near the worst outcome for the bank, so banks have an incentive to work with borrowers to see what can be done to get the loans back to current. Of course, nothing says that a bank will be competent when suddenly faced with 10x the defaults as they are used to, or that individual collectors won't have a bad day.

When I worked in auto 'loss mitigation', the problems really occurred when the borrower stopped communicating with us, usually by ignoring our calls and letters. I am sure that most Bogleheads, if $50K suddenly disappeared from their brokerage accounts, and kept getting sent to voicemail, would call every day until they heard what was going on. Banks do something similar, but at least at my former employer, once we have someone on the phone, the agents have been trained that more flies are caught with honey than vinegar.
Thank you for this informative answer!

It sounds like it would be a little hard to predict what would happen in a worst case scenario. But good to hear there is not a particular reason to worry about this non reporting?

middistancerunner
Posts: 141
Joined: Tue Aug 19, 2014 12:02 am

Re: Is it a problem that our mortgage lender doesn’t report to credit bureaus?

Post by middistancerunner » Fri Sep 14, 2018 2:31 pm

blevine wrote:
Fri Sep 14, 2018 2:26 pm
Who says that if you don't pay, they wont START reporting your loan at that time ?
They can change their minds anytime or may have an undisclosed policy they did no choose to share.

Note that often these free report/score sites tell you what you can do to improve your credit,
they always tell me that my lack of auto or home loan is a problem. I only have credit cards, no other
form of loans. So they are telling me I need some other debt, yet the lender does not have to report it !
Good to know. Not that I was going to take a loan to improve my score...but some might.
Understood. The banker said it quite categorically - “we do not report to credit bureaus”- which just surprised me. But it makes a lot of sense that there are ways it could end up reported nonetheless.

Basically I was taken aback as I didn’t even know this was possible. And wanted to interrogate if there are any serious downsides or things to worry about.

FunnelCakeBob
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Re: Is it a problem that our mortgage lender doesn’t report to credit bureaus?

Post by FunnelCakeBob » Fri Sep 14, 2018 3:28 pm

middistancerunner wrote:
Fri Sep 14, 2018 2:31 pm
Understood. The banker said it quite categorically - “we do not report to credit bureaus”- which just surprised me. But it makes a lot of sense that there are ways it could end up reported nonetheless.

Basically I was taken aback as I didn’t even know this was possible. And wanted to interrogate if there are any serious downsides or things to worry about.
Hey runner, I also took advantage of the same loan program. I don't recall the loan showing up on my credit report either. I guess the bank made the business decision to go down this path, perhaps to avoid certain compliance costs and complexities. On-time payment for this loan account will not figure into your FICO but the impact should be negligible if you have other loans and credit cards. And of course you're still on the hook legally for this loan.

Stradovinski
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Re: Is it a problem that our mortgage lender doesn’t report to credit bureaus?

Post by Stradovinski » Fri Sep 14, 2018 8:40 pm

I refinanced a few years back through them. Nothing fancy, just a 30 year loan. Mine does show up on my credit report so it must be something with the type of loan it is.

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