On your after-bankruptcy credit report, your mortgage is the account most likely to be wrong. What the mortgage companies do is far worse than HSBC (see my Nov 22, 2010 blog). HSBC just parks your late status and doesn’t update showing bankruptcy. The mortgage companies often update every month, saying you are late and getting later.
This leads me to two questions. Why are they doing this? And how?
The credit bureaus promised the judge in the Terri White class action they wouldn’t allow this. They promised to block creditors from updating late accounts after bankruptcy. (The exceptions are things the bankruptcy doesn’t clear up–like child support and taxes.)
So how are they getting away with it?
The answer is in the credit reporting instruction manual, published by the three credit bureaus. The manual, called Metro 2, includes about a dozen codes for bankruptcies. Chapter 7, chapter 13, discharged, dismissed.
One of those codes, Code Q, means ignore the bankruptcy. We’re seeing mortgage companies report a code Q–ignore the bankruptcy–to the credit bureaus. And then they start reporting people late again. The credit bureaus are using that code Q as their reason (or excuse) to let the mortgage companies keep up late reporting on debts that were cleaned up in the bankruptcy.
But why? It doesn’t make sense. I can understand HSBC parking a three thousand dollar credit card on your credit report. Three or four years after the bankruptcy, especially if you’ve lost contact with your lawyer, you might go on and pay it to clear up your credit.
But nobody can afford to pay a $100,000 mortgage to fix their credit. Can they? (Recently I had a client call Bank of America to complain about a mortgage still showing a past due balance after bankruptcy. And Bank of America told her, “now that the bankruptcy is over you still have to pay.”)
So maybe they think they can hammer people into making payments when they don’t have to, just by continuing to hit their credit. (Even if only one person out of ten thousand does it, they’d come out ahead, since it basically doesn’t cost them anything. Unless they get sued for it)
I’ve sued on three of these cases so far–got the after-bankruptcy credit report fixed and got people a little money. My clients were happy to settle for that.
I have another one of these cases going now–and my client is really hacked at her mortgage company. (She works in the finance industry and knows how much this hurts.) So I hope we can keep the case going a little longer–long enough to make the mortgage companies explain what they think they are doing.
When I find out, I’ll post it here.
{ 47 comments… read them below or add one }
Thanks for this post. I had no clue about code “Q” and I am very knowledgeable about credit reports. Thanks for the lesson! That is why I continue to read your post’s, I learn something everytime!
Here’s a link to a Code Q example.
http://robertweed.com/blog/wp-content/uploads/2010/12/Code-Q-Pages-from-violation-samples.pdf
The mortgage company ignores the bankruptcy and goes right on hitting the credit report.
Thanks for this quick insight! I was denied a mortgage in February because my bank continued to report late payment for 14 months about my bankruptcy was discharged. I called them today to start an “investigation”; I’ll be opening disputes with the credit bureaus shortly. I have this article bookmarked in case I need your services.
Wells Fargo has reported me 120 days late for almost 5 years during a Chapter 13. I disputed and also contacted the CEO office. I received a letter stating their policy was to keep reporting the mortgage late even during bankruptcy – that was until they changed their policy in October of 2o10.
I read in your blog you sued and won. I have cleaned up my credit since my bk was dismissed – all but Wells. I would like to know how to get a case started and I’m sure I’m not alone with them! The almost 5 years of 120 days has trashed my credit I think worse than the BK!
Please contact me at the email address I provided.
Thanks!
Where are you located? What state?
My husband has this exact same problem with BOA and Experian presently. My credit report says “discharged in chapter 7″ and his says “open, past due . . . .” Please post any updates you have or let me know how we can get this corrected. I have disputed it twice through Experian and they say that BOA has verified it as correct information. What rights do we have or what can we do?
You need a credit report lawyer. Go to the National Association of Consumer Advocates–NACA.NET. You’ll find a lawyer who will be glad to take them on. Go get ‘em!
Our chapter 7 BK was almost 7 years ago. We sent them an affirmation, they returned it too late, which as I read is probably a good thing. Chase Home Finance has reported us for the last 5. We originally were making payment on time and kept up with the mortgage, but have since fallen behind. I also have tried 4 mods, paid all the initial money down, etc. but have never had one completed due to being passed around to various employees. They have not sent “the foreclosure” papers yet, but am expecting them some day. Is it possible to sue them for the credit reporting issue and/or mod failure? Please advise as I take your knowledge to heart. Thanks!
As to giving you the run around on loan mods, you’d get no where in court with that in Virginia, which is where I am. Some states may have state laws and friendlier judges, I don’t know.
As to credit reporting, if they are now reporting you as late or something, that’s a violation. It should just be showing bankruptcy. (And if it’s been seven years it should be about ready to drop off your credit report altogether.)
But you cannot go after them unless you first dispute it–and you have to dispute with the credit bureaus–sending a copy of the dispute to Chase. That may fix it; if it doesn’t, you need to find a Fair Credit Reporting lawyer in your state. A good place to look is the National Association of Consumer Advocates.
(You might already have the right to a very small recovery against the credit bureaus under the Terri White bankruptcy credit reporting class action. But that’s all tied up with some lawyers wanting to settle for peanuts–arguing it’s better than nothing. And some lawyers want to fight it out. I wouldn’t hold my breath.)
I had a bankruptsy 2 years ago. I reaffirmed on my mortgage at Wells Fargo. Since then i have gotten an Experian credit report. Wells Fargo shows they were included in the bankruptsy, and have not been reporting my mortgage payments for the last 2 and a half years. What can i do about this, and is this legal? I live in Indiana.
Are you SURE you reaffirm your mortgage? Have you asked your lawyer to be sure? Reaffirming a mortgage in this market would usually be a very bad idea–except it should help your credit. Many courts won’t allow it. So, I’d start there and be sure.
I filed Chapter 7 a year ago, asked Wells Fargo to reaffirm on mortgage they declined, at that time I was on a payment plan to remodify my loan, a month after bankruptcy my remod went through and they do not report my payments to the credit bureaus at all, it states bankruptcy next to my mortgage. Do they not have to report my payments, they are telling me since I filed bankruptcy they are not allowed to report a on time payment or a late payment. I live in Michigan. Thank you.
Right, since you filed bankruptcy, they should NOT be reporting your payment on your credit report. Your credit report should show the mortgage is being discharged in Chapter 7 bankruptcy, even if you are still paying. That’s because you can move out and any time and owe them nothing. Don’t know where you are in Michigan, but I do know that in a lot of places values have dropped A WHOLE LOT. The right to move out at any time and not owe them any money then, is very valuable. If your credit is a little worse because your payments don’t show–I think that’s a small price to pay.
That is exactly the situation I am in, I owe $34000.00 more then what my home is valued at. If I stop making payments how long to I have before I have to vacate the home and will I ever be able to qualify for a mortgage again?
Nancy’s situation is a little like mine, but I intend to stay and keep paying my mortgage. My Chapter 7 was over 6 years ago, and I’ve never missed a mortgage payment. My mortgage company tells me they’re reporting the mortage as current and active, yet it shows on three major credit bureau reports as “discharged/closed”, as if I have no real estate loan at all. What is my recourse to get my mortgage on my credit report? I also had an auto loan at the time of Chapter 7…that’s being reported as current and active…so why isn’t my mortgage?
Sorry, I agree with the credit bureaus on this.
@Robert or anyone curious to know. My BK just discharged 3 month ago, so I had my credit checked. I noticed my BOA mortgage is showing BKPET with a 0 balance with experian. Now my realest trade line on the credit is showing 0 owed on real-estate. When in fact, I’ve never been late or past due. Still now receiving current statements. Suggestions ?
Robert, is it when the BK7 is filed or discharged that the mortgage company is not suppose to report any late payments on the loan to the bureaus? I believe it is from discharge date but a realtor I know is telling me from file date.
Filed date. The discharge relates back to the filing. At least in my view. I’ve had a bankruptcy judge tell me the discharge date.
Long story short my wife reaffirmed the mortgage but I discharged it, but everytime she’s late it shows on transunion and experian, but my equifax is showing IIB I disputed them on my credit report the mortgage company verfied, do I have a case against the mortgage company? I’m in kansas
Yes, you have an FCRA case against the mortgage company, and also against TU and Experian.
In our situation we filed bankruptcy 11/29/2008 and it was discharged 03/07/2009. We let the home we owned go in bankruptcy. We are now trying to buy my father in laws home from him. The company we are working with is now requesting that Bank of America send us a letter (yeah right) that the home was included in bankruptcy as BOA has listed on our credit as bankruptcy 03/09 and also foreclosure process started 03/2009. We moved out of the home in November just before we filed. Can they report on our credit? I spent 2 hours on the phone with BOA and have gotten no where. I understand that they had to follow the proceedings in order to get the title back in they’re name from when we left the home but how can they place any negative info on our credit report after the bankruptcy? We are in Missouri.
Keep us posted. I think the problem is when did BofA actually foreclose? How long has the house been out of your name? I try to tell people do NOT move out–do NOT move out–until there’s been an actual foreclosure. But some people move first and talk to a lawyer second.
What I understand–and some people have said there are ways around it–you cannot get a loan tunil three years after the BK was discharged–that would be March coming up. and also three years after the actual foreclosure. Which is what you need to find out.
I live in Wisconsin and since my ex-husband wanted the house, I quit claimed the house to him in December of 2007. Unfortunately, he let the house go into foreclosure several times. The first time (2008), I tried to help him save it by doing a modification. He was doing well with that but decided with the amount of debt I had, I would file bankrtupcy and absolve myself from the home completely, just in case. In 2009, I filed for and was granted Chapter 7 bankruptcy in November of 2009. The second time (2010), I contacted the law office handling the foreclosure and told them I was granted bankruptcy and also quit claimed the property. They asked me to file another QC deed, which I did. The case was ultimately dismissed. The third time, in December of 2010, I (along with my new husband) were served with foreclosure papers. I filed an answer stating I quit claimed the house in 2007 and was granted bankrtupcy in 2009. To date, the case continues with both my current husband’s and my name as defendants. Just this month, my husband and I were talking about possibly buying a house so I ran my credit report to see what’s on it. To my shock, the mortgage company is still reporting monthly and has been doing so for the last 2 + years. They are the only company that did not report the discharge at all. I’m wondering what my options are. Could you please give me some insight on this?
They are definitely not allowed to be reporting the mortgage late after the bankruptcy. I don’t know where you are in Wisconsin. Was your bankruptcy judge, Judge Sue Kelly? I think you’d have a chance that she would rule that hitting your credit report is a violation of the bankruptcy discharge. Otherwise, you’ll need to do Fair Credit Reporting disputes and then sue if that doesn’t fix it. You can look at NACA. http://naca.net/. for lawyers in your state who do credit report law.
Sadly, I’m not surprised that there is still no foreclosure. I tell people when I can–live for free as long as you can and don’t move out until you know it’s foreclosed. (If you are getting divorced and remarried though, that advice doesn’t work so well.)
If you and the new husband are going to buy a house, I think it will have to be solely on his credit. You can’t buy a house as long as the old one still have a mortgage in your name. (Even though the credit report should NOT show it, there still is a mortgage in your name until there’s an actual foreclosure.) and for a couple years after. But talk to a lender in your area and see what they tell you.
Thank you for your response. I did not think they could do that and I still can’t get over the fact that they have been reporting it the entire time. They made absolutely no notation about the bankruptcy whatsoever and just continue to keep reporting negatively about how much is owed each month (takes about 1 page for all their notations). I do not owe this debt any longer so I’m at a loss to understand what they are trying to do.
In answering your question, my Judge was James Shapiro, Eastern District of Wisconsin. I am teetering between writing to the foreclosure attorneys again, informing them of their client’s violation or just hiring an attorney and going straight to court on this matter since this has been going on for 2 + years now and how many times do I have to say something? I have told the foreclosure attorneys on two occasions, the second by actually filing an answer to the foreclosure, about the bankruptcy, and it is also noted in the court record I was granted bankruptcy, yet nothing has been done. The case has been pending for a year and my ex is still trying to obtain a loan modification so who knows how much longer this could go on. I’m curious to know what the court would do for the violation, a slap on the wrist? A fine? Is it worth bothering the court over?
My husband has set up an appointment for tomorrow to talk to a lender and see what our options are as far as becoming homeowners. I’m keeping my fingers crossed but not holding my breath.
Robert,
I see that you have provided some great advice for others, so maybe you can help with my questions. I have BOA mortgage modification which started at 2% I/O and is now at 3.5%. I also had a Chapter 7 BK discharged in 2008. I have not been late for the past 27 months on my mortgage and have paid $54,000 in I/O payments to BOA during these 27 months, however in my case the 3 credit reporting agencies have me reported as a zero balance and has not been reported by BOA at all. Of course i am upset that i have paid these much and it is not reported. I live in CT and would like to know my options. I have spoken to BOA several times and they always say it’s being report, but is clearly not being reported.
1. Do you think they will report if i stop paying? this is not my intention to do so but would like to know?
2. Do I have a case for legal action/lawsuit?
any insight would be great.
You may not like it, but I think they are reporting you correctly. The bankruptcy should be the last report. They should not report if you pay; and they should not report if you don’t pay.
Thanks for the fast response. I was thinking that was the case. However, do you think they would be quick to take legal action against me? I work for a very large if not the largest bank in the world and work with defaulting homeowners all day long. I see some people not pay for more than 3 years without us taking legal action. I know i can play the legal game with them for a few years if i really wanted to and never have the house go into foreclosure.
If possible i would like to speak via phone, what would be the best number to reach you on?
I am going through a credit reporting myself. My husband and I filed Chapter 7 in 12/08 that was discharged in 3/23/09, including our conventional mortgage. The stay was lifted and foreclosure proceedings were started on 3/17/09. Both Equifax and Trans Union are reporting “included in bankruptcy” however Experian is reporting “Foreclosed” on the status line of the account. I am in the process of applying for a FHA loan now and they are requesting a letter from Wells stating the status of the account is “included or discharged in bankruptcy”. Wells has been telling for the last 45 days that yes my credit report should state IIB however I cannot get anyone to put it on letterhead. I have also electronically disputed this with Experian directly and they changed from Foreclosure proceedings processed to foreclosed. HELP me please. I am located in Virginia.
Thank you,
Tina
Where in Virginia are you? Who was your bankruptcy lawyer? this is why I check this for all my clients–so it gets fixed before it’s an emergency.
I live in Stafford and Tommy Andrews was my lawyer. I wish I had been a little more selective when looking at attorneys now. Thanks for responding so promptly.
Robert
I am finding so many different answers. Am I able to go back to my attorney now a couple years later.
Robert
Will you be able to answer my question?
Hello Mr Weed,
). We put in for a dispute, but from what I am reading on here, we are in for a nightmare to get it removed. Anyway, yesterday we received a letter from Chase telling us that our home loan has been sold…..to Ocwen. Hahahaha What are they up to? I have an idea, but I just want to hear it from someone other than our lawyer. I want to thank you so much for this site. The information contained here is just priceless.
I sure wish you were our lawyer. You are worth 10x more than what we paid ours…lol
I have pretty much learned all of the answers to my questions here, but I have a twist. My husband and I filed for BK in 2009, which was discharged including our 1st with Chase and our 2nd with Ocwen. We had no idea Chase was going to offer us a remod, we were packing and waiting for our foreclosure notice. We were also unaware that since we accepted the remod terms with Chase, we would eventually have to deal with Ocwen. We were under the impression from our lawyer that Ocwen was done with, no matter what. Completely clueless. During the past 2 years, Ocwen has been sending us “informational” statements and then they sold the debt to Litton Loan Servicing and Litton started sending us actual bills. I placed a phone call to Litton and told them this debt was written off in a CH 7. Next thing we know, Litton sends us a letter and informs us that Ocwen was our “new” lender on this loan. We just ignored it thinking they were just being annoying. We called our lawyer each time and they assured us all was fine. So we go to prequal with a lender last week to buy another house and they kindly inform us that there is a 180 day late from Ocwen on hubby’s credit through Experian. It is the same debt with a new account number (and a Q
My husband and I filed for bankruptcy and was discharged March 2011. We did not include our home in the bankruptcy but have not reaffirmed the loan. We have been paying the mortgage and have never been late. Our credit reports show that our mortgage was included in the bk and is reported as being paid on time. I disputed the fact that it was included in the bk and transunion took the entire history of the loan off my credit report. So now I have no history of paying the bill. Should I have left it alone or was I right in having it changed? How do I get my current mortgage payments reported on my credit report? Thank you!
Elaine:
Sorry, you should have left it alone. They were making a mistake reporting the payments, and when you disputed it, they saw that mistake and fixed it. The opposite of what you wanted.
Most people, like you, think you choose what debts you “include” in your bankruptcy. Lawyers, judges and credit bureaus see it differently. When you file bankruptcy, EVERYTHING is included. Some debts you can’t get rid off–taxes, usually, child support, student loans. And some you still pay–your mortgage if you want to live there. But they are all “included.”
Is there anyway I can get my mortgage payments back to being reported on my credit reports? Do I have to reaffirm my mortgage to do that? What are the benefits/drawbacks of reaffirming my mortgage?
Thank you again!
DJ:
Sorry I have taken so long to answer you, here. I’ve wanted to give you some good advice, but I’m not sure I have any. At least not on any way to avoid the “nightmare” on getting your credit report fixed. sorry.
If you end up losing that loan, it would be nice if there is someone you can sue. So, here goes.
When Litton started billing you again, they violated the bankruptcy discharge. You can sue them in the bankruptcy court for that. You and your lawyer would get something. Most bankruptcy judges won’t give you much for that. (Sounds like you need a more aggressive or diligent bankruptcy lawyer than the one you had.) The bankruptcy courts are limited in how much they can award for that, but something.
Litton, because they took the debt over when you were behind, is also a debt collector under the Fair Debt Collection Practices Act. (Except in a few courts where some not-so-friendly judges have said that mortgage servicers can never be debt collectors.) Sending you a bill is also a violation of the Fair Debt Collection Practices Act. It’s a false statement of the amount and legal status of the debt. You can sue them for that. You can find a lawyer who does FDCPA law in your state at NACA.net. What will you get? Well, you were annoyed; that’s about it.
Now, is Ocwen a debt collector? We really want them to be. The letter that says the loan was “sold” to Ocwen helps. (We like “sold” as oppposed to say, given back.) If they count as the original creditor, then the FDCPA doesn’t cover them. If they count as a debt buyer, buying the debt when it was behind, then they are. (Some states have laws that cover original creditors, too. It would really help if you were in one of those states.) Then Ocwen putting on your credit report that you’re 180 days late violates the FDCPA. (False statement of the legal status of the debt). That false statement caused you to lose this loan. (That can be tough to prove–I doubt your lender would want to testify for you, but maybe.) You could ask a jury to really sock them for something substantial, because you really were hurt, not just annoyed, by what they did.
(I think that it’s perfectly apparent that putting late charges after bankruptcy on your credit report violates the bankruptcy discharge, too. Because I think the record is clear that the original purpose of credit reports was to pressure people to pay. Using credit reports to help people get loans came along later. Almost no bankruptcy judges anywhere agree with me on that. If you had a judge who thought credit reporting on a discharged debt violated the bankruptcy law, then that judge couyld slam Ocwen for causing you to lose that loan.)
You might also be able to sue Experian. Usually under Fair Credit Reporting, you cannot sue anybody unless you first do a dispute. But you can sue a credit bureau for a re-insertion. If they delete something out of the credit report–and then put it back–they are supposed to warn you. They never warn–they just try to prevent re-insertions. So the balance on Ocwen was deleted when you filed bankruptcy; and then they let is back in. Is that a reinsertation? Maybe. (Now to make that argument, you have to say that the Ocwen original laon and the Ocwen “sold” loan are the same. To get the FDCPA to work, you have to argue they are different. So .. . . Well, I’m a lawyer. (Sadly, you’d be in danger of losing on the FDCPA with an anti-consumer judge saying Ocwen is an original creditor; and then lose of the FCRA with the anti-consumer judge saying there’s no reinsertion because it’s a different loan. Now if you had a pro-consumer judge, you might win on both. ) You might also go after Experian for allowing it back in under the Terri White class action. If you want a headache, you can read about that here. http://www.nclc.org/images/pdf/unreported/White_Order.pdf
Good luck. I’ve given you my best shot. Wish I had more.
Thank you so much for your response. You have given me plenty.
Robert,thanks for having all this information to read through, it has helped us out with pushing through our current issue with creditors and credit bureaus post bankruptcy. We filed a chapter 7 Bankruptcy and it was discharged April 2010. I have done well rebuilding our credit and we were ready to purchase a home so when i checked my credit 1 bureau started reporting in February 2012 that our Mortgage that was included in our Bankruptcy, was in Foreclosure and didn’t show included in Bankruptcy. I have disptuted this on the credit report and the creditor denied to clear up my Credit Report. Now I have sent a certified letter to both the creditor and the credit bureau with proof that the Mortgage was included in the bankruptcy to get it taken off my report. If you could help me find out what the next step will be if it is denied again that would be much appreciated. Thanks again for your blog!
Look for a credit report lawyer in your state. Go to naca.net. Naca is sponsoring a class for their lawyer members on this topic in the next week or so. (This NACA is the National association of Consumer Advocates–not the NACA that works on loan mods.)
We filed for Chapter 7 back in 2007 and both our first and second mortgages were discharged and not reaffirmed. We are preparing to go thru a divorce and have stopped making payments on the second mortgage as we are not planning on keeping the house and are upside down anyway. The second mortgage company has now started calling regarding payment. I realize that the lien on the home still exists, but is the mortgage company violating the law by calling us about payment on a mortgage that was discharged, and if so, what should we do?
Marianne:
Yep. The second mortgage company is violating the bankruptcy law by calling you.
You should go back to your bankruptcy lawyer and ask the bankruptcy judge to sanction them. Make a little money and also do your bit for “the rule of law.” Big companies are like small children–they do what they can get away with. It’s a good thing for the country if you don’t let them get away with calling you illegally.
Does it cost anything to go back to our Bankruptcy lawyer and ask to have them sanctioned?….it isn’t an everyday occurence…but they have now called me twice in the last week and half.
Hi. I filed a chapter 13 bankruptcy and reaffirmed my home, however I am currently behind on making the mortgage payments. The BK should be discharged in about a year. If I am not caught up by the time the mortgage is discharged, will the mortgage company be able to immediately start foreclosure proceedings?
Lana:
You’re telling me that since you filed the Chapter 13, you have fallen behind on your mortgage payments. Yes, if you are not caught up by the end of your Chapter 13 plan, they can foreclose. In fact, they could ask the bankruptcy judge for permission to start foreclosure now. You need to let your lawyer know that you are behind, BEFORE the bank goes in front of the judge.
Why are you in chapter 13? And why have you fallen behind on the house. You should also have a discussion with your lawyer about whether staying in Chapter 13 makes sense for you. And whether there’s a strategy for getting out.