Here's a simple tip for Family Law Attorneys
The only attorneys that I know of who do this one simple thing are those who have referred their clients to me for mortgage financing. And, I do all the work to make it happen. It adds value to your service to clients.
How to specify consumer debts assigned in the decree.
Most divorce decrees list the last 4 digits of an account number when it is assigned under “Debts to Wife” or “Debts to Husband.” Credit cards typically have 16 digits, installment accounts have anywhere from 4 digits to well over a dozen. Still, divorce decrees will typically use the last 4 and designate as something like XXXX4506.
However, credit reports typically report the first 12 digits of a credit card account, leaving off the last 4 digits. They do it for much the same reason you only list the last 4 digits of an account – protection of the client’s personal account information.
This is a problem - more so now than in recent years. Let’s take a hypothetical case study. The husband in a divorce is being assigned the following debt in addition to others and it is designated thusly in the decree:
Bank of America VISA account no. ending in 4506.
But, husband has applied for a loan and the underwriter reads the credit report which identifies a Bank of America credit card account by the partial account no. 499912345678. It is missing 4 digits. We happen to know that VISA accounts begin with 4, MasterCard accounts begin with 5 and Discover accounts begin with 6. We’ll get to American Express in a moment. So, we assume that the credit report is reporting the first 12 digits of a VISA credit card account. So, what are the last 4 digits and how is the underwriter supposed to discover this information? In a standard loan, the borrower has to give account for all debts that appear on his/her credit report. No big deal. They are either accurate or they are not. But, in our situation – a recent divorce – all debts are up for grabs and any party could be assigned a debt that does not appear on their credit report.
Let me re-state that: When a loan applicant has recently been divorced, the underwriter now has two separate listings of debts which must be reconciled with the credit report and included in the applicant’s all-important debt ratios. In theory a borrower could have 6 debts on his credit report and another 6 which are assigned to him in the divorce decree which do NOT appear on his credit report. The point is, that underwriter must clearly discern all debts assigned to the borrower.
So, in the case above, the underwriter must match assigned debts with those debts which appear on the credit report or assume that there is another outstanding debt that is being assigned to the borrower/client. Thus, it is critical to know the account numbers that appear on a borrower’s/client’s credit report.
This is really simple if your client is working with me. It is part of my standard Assessment/Approval. I will guide you through the drafting of that part of the decree, providing the minimal account number designation.
For example, in the case above I would recommend that the account number be specified as “beginning with 4999 and ending in 4506.” I might recommend that it also stipulate (as is not uncommon in divorce decrees) that the approximate balance be stated. This approximate balance would be stated at exactly the dollar amount showing as the balance on the credit report. (This is helpful so long as the borrower is closing their loan very close to the date of final entry of the decree. However, as decrees and credit reports age, it is less likely that the decree’s stated “approximate balance” will match the updated credit report’s statement of the balance).
You might be wondering – Is this really a big thing? Can’t the underwriter find out what account is being referenced by obtaining an account statement from the borrower which would publish the account number – all 16 digits?
Well, yes . . . maybe. Have you seen credit card statements lately? With greater frequency, credit card companies are redacting account numbers in part. And we haven’t even talked about American Express accounts yet . . . hang on. So, the borrower/client must call the credit card companies and beg and cajole and plead their case until someone answering the phone in Pakistan promises to mail a letter that specifies the full account number. Good luck with that.
The most common work-around when no such statement is available is what we call a “credit supplement.” The lender’s credit repository calls the credit card company to verify the information, in this case, the full account number. They’re so nice - Especially because they charge more than $30 per tradeline per bureau to verify this information. That’s usually almost $100 for each trade line with three bureaus. We’ve seen customers pay hundreds of dollars just to get information verified and documented for loan files. Add to that the inconvenience of having to wait another 3 days or more for such information to be verified when the borrower/client is trying to close their mortgage transaction.
This little tip is so simple yet it saves so much time and money for your clients.
Now, let’s pick on American Express. They (4 or 5 managers at AMEX, 3 hours into a happy hour) figured out how to confuse underwriters and borrowers by printing the ENTIRE account number. But wait. AMEX doesn’t print the REAL account number. They make up a fake number; and, THAT’S the account number they report to the credit bureaus and the one that shows up on credit reports.
Time out. Did anybody at AMEX ask, why publish any account number if they would be the only ones who knew that it was tied to the account in question?
AMEX accounts present confusion in all of their account reporting. In the case of divorce, even if you specified the entire AMEX account number under the assignment of debts, the underwriter still could not match that debt to the ones which appear on the borrower/client’s credit report. The account numbers are totally different. They are what I call “faux account numbers.”
So, how do we deal with this when processing loans for divorced borrowers? Let’s take the AMEX account number ending in 9876 as it might be designated in a divorce decree. I recommend that the debt be designated as
AMEX account number ending in 9876 and also identified by [whatever] the faux account number [is; like] 3392982346925883.
Done! The underwriter is able to match it immediately to the proper account on the credit report.
So there it is. A simple tip that will add value to your service and save your clients time and money.
All you need to do is tell your client, “Call Noel Cookman at 972-724-2881 as soon as you leave the office.” You could also say "if you'd like to save a lot of time and frustration and up to $100 for each debt assignment in the decree, call Noel Cookman."
Noel Cookman
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