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Equifax ‘Coding Issue’ May Have Skewed Thousands Of Mortgage Credit Scores

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A “coding issue” reportedly affected about 12 percent of credit scores calculated from March 16 to April 6, 2022.

Borrowers taking out or refinancing mortgages in late March and early April may have had their credit scores calculated incorrectly, due to erroneous information provided by Equifax.

This raises the possibility that thousands of borrowers were given higher or lower interest rates than they might otherwise have qualified for, and others may have mistakenly been turned down or approved for loans.

The problem — first reported Friday by National Mortgage Professional — was created by a “coding issue” that was in place “over a period of a few weeks” and has been corrected, Equifax confirmed to Inman.

Neither Equifax; mortgage giants Fannie Mae and Freddie Mac; or their federal regulator, the Federal Housing Finance Agency would comment on potential repercussions for borrowers or lenders from the error, including:

  • Whether any affected borrowers were assigned a lower credit score than they should have been. If so, were they turned down for a loan or offered a higher interest rate than they might have qualified for?
  • If affected borrowers were assigned higher credit scores than they should have been, could lenders experience greater losses on those loans that Fannie Mae and Freddie Mac might be liable for?

Citing an anonymous source who works in the credit resale industry, National Mortgage Professional reported that Equifax informed mortgage clients the coding issue affected about 12 percent of credit scores calculated from March 16 to April 6, 2022.

The coding issue was introduced during a technology change to Equifax’s legacy online model platform, National Mortgage Professional reported, generating incorrect values on certain attributes, such as the “number of inquiries within one month” or “age of oldest tradeline.”

Those incorrect values — when run through the algorithm used to generate credit scores — could help or hurt the applicant’s credit score.

National Mortgage Professional said that according to its anonymous source, Equifax informed credit resellers that about 9 percent of scores were impacted by 10 points or less, less than 3 percent were affected by 11 to 20 points, and less than 1 percent were impacted by more than 20 points.

Depending on the borrower’s credit score, and whether it was helped or harmed by the error, some borrowers may have paid higher or lower rates than they would otherwise have qualified for. Others may have been approved for loans they didn’t qualify for or rejected when they were actually qualified.

Equifax, which according to its most recent annual report to investors generated $190.4 million in revenue from its mortgage solutions products last year, provides credit reports that combine information from the three major consumer credit reporting agencies (Equifax, Experian and TransUnion) into a single “merged” credit report in an online format, commonly referred to as a tri-merge report. Mortgage lenders use the reports to make mortgage underwriting decisions.

Equifax also offers services that alert lenders to changes in a consumer’s credit status during the underwriting period, and securitized portfolio risk assessment services for investors.

The company provided the following statement to Inman:

“Equifax identified a coding issue within a legacy, on-premise server environment slated to be migrated to the new Equifax Cloud infrastructure. Data quality and accuracy are at the heart of everything Equifax does and we take this technology issue very seriously. This issue, which was in place over a period of a few weeks, may have resulted in the potential miscalculation of certain attributes used in model calculations. Our analysis indicates that there was no shift in the vast majority of scores during the timeframe of the coding issue. We have proactively notified our customers and resellers and are working closely with individual organizations on analysis. The issue has been fixed and we are accelerating the migration of this environment to the Equifax Cloud, which will provide additional controls and monitoring that will help to detect and prevent similar issues in the future.”

Fannie Mae and Freddie Mac both provided nearly identical statements to Inman, saying the companies were recently made aware of an Equifax coding issue “impacting certain consumer credit data and credit scores” and were working with their regulator, the Federal Housing Finance Agency, “to identify any impacts.”

The FHFA provided a similar statement, recommending that additional questions be directed to Equifax.

Borrowers often face “serious harms” because they can’t get errors on their credit reports fixed, according to an analysis published in January by the federal government’s consumer watchdog. Credit bureaus have “little incentive to treat consumers fairly when their credit reports have errors,” the Consumer Financial Protection Bureau, said in its analysis of 700,000 consumer complaints.

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Email Matt Carter

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