Boderline Fraud - More Subprime Mess

[legion]

Some say "creative". I say "fraudulent".

Lousy Credit? Buy Somebody Else's
LOS ANGELES (The Los Angeles Times)--The Bush administration came up with one fix for some sub-prime borrowers who are in trouble. A San Diego company offers another: Buy a better credit score.
With one or more of the "seasoned primary accounts" that TradeLine Solutions Inc. began selling this week, the company's website says, you can "dramatically increase your credit score" for as little as $1,199.

"A customer with a 550 credit score can come to us on Monday and walk into a bank by Friday with great credit to refinance or obtain a loan," Chief Executive Ted Stearns said in an interview, adding that buying good credit was a way for sub-prime borrowers to get out from under oppressive mortgages.

The company's website says the TradeLine's system is "100% legal." Stearns acknowledged that some observers might see it differently.

"Are there people out there who are going to say that it's mortgage fraud?" he said. "Sure, there could be."

TradeLine, Stearns says, has contracts with several banks -- he declines to identify them -- that have agreed to add TradeLine customers' names to the records of loans recently paid off by the banks' customers. These loans are known in the industry as dormant.

The banks are paid $500 to $700 per transaction, Stearns said. It is unclear if the person who took out the now-dormant loan receives any compensation.

The addition of a TradeLine customer's name to a dormant loan doesn't affect the original borrower, Stearns said, because the TradeLine customer is given his own loan account number while the original borrower keeps his.

That is common practice when assuming a live loan, banking experts say. Such loans are frequently taken over from original borrowers, such as when someone buys a car from a person who still owes money to a financing institution.

Banking experts said that taking over a loan that had been paid off -- a situation in which a person would get credit for the account's paid-in-full status even though he had nothing to do with settling the debt -- was unusual.

"I've never heard of this before," said Frank Newman III, president and chief operating officer of Wachovia Corp.'s Western banking group. "I can't imagine a lender going along. This is taking gamesmanship to a whole new level."

Law enforcement authorities said they were unfamiliar with TradeLine, which was incorporated in June, and couldn't comment on its products.

In general, they said, using bogus information to get a loan is a crime. It is bank fraud if the institution duped is federally insured, according to the FBI, or grand theft in other cases, according to the district attorney's office in San Diego.

Stearns said he saw nothing wrong with people trying to boost their credit scores and described the TradeLine seasoned account product as a "clever tactic" to help borrowers "beat the credit reporting system and avoid getting trapped in the sub-prime crisis."

"What's more of a fraud is that most of my clients are individuals who were sold sub-prime mortgages that they couldn't afford," Stearns said. "What do you say to that family of four when they bought their house three years ago and they stand to lose their house?"

TradeLine deals in another credit-boosting technique that is known as piggybacking, which adds a new "authorized" borrower to an existing account. This is a common transaction. A parent, for instance, might add a child who recently graduated from college to a long-standing line of credit, thus boosting the youngster's chances of qualifying for a credit card or car loan.

At TradeLine, customers become authorized users on strangers' credit card accounts. The company pays a cardholder $100 to $150 to add an authorized user, Stearns said.

Piggybacking has been criticized as leading to the issuance of failed loans. Fair Issac Co., which sells FICO credit scoring software, revised its formula for 2008 to eliminate the beneficial effect of being an authorized user.

Stearns said that was why TradeLine came up with its new product.

A TradeLine press release issued this week said the company would continue to search for "loopholes" to help people.

Stearns said it was "possible" that a TradeLine customer might run into legal trouble but added: "I would say that it is really hard to enforce the law."

[RANDY P]

and yet another form of loan fraud. As it sits, virtually every lender will ignore a customer with a tradeline that says "A" for authorized user - the bank knows that it was added on after the fact and the borrower actually isn't paying it.

Some LO's were adding their borrowers to their own credit cards as authorized users in attempts to fix FICO.

One thing - is that you can add all the perfect tradelines in the world, and have the highest FICO in the world, but if you have a shot-up mortgage repayment history, that overrides ANYTHING else.

Hypothetically a guy with an 800 FICO if he has numerous lates on his mortgage, they will grade it off of that or simply kick him out.

This company is definitely doing something fraudulent if they are adding trade lines that don't really exist and getting banks to report their clients on those accounts - the banks themselves would have to report the fraudulent information to the credit bureaus.

This company is going to get busted up, quick. Do not believe anything they say - it isn't gonna work. They might even be falsifying bank letters to the credit reporting agencies stating that mortgage lates aren't real. That is highly illegal, credit reports and data are protected by federal law and will get you thrown in jail, quick.

These pricks are ripping everyone off..

rjp

[Rick Lee]

Randy, how many 800 FICO's have you seen with recent mortgage lates?

I have heard of some loan officers offering a service to raise FICO's for around $1500, but I don't think there's any fraud involved. They just look over the person's credit report and tell them how to raise their score - close old trade lines, clear up disputes, etc. It's actually pretty obvious stuff to anyone who's worked in a lending business. Then they order a rescore and sometimes the FICO has been bumped up to above whatever threshold.

[RANDY P]

I've seen 'em pop up making legitimate lates dissapear.. Credit repair does not make the issue go away, it just masks it.

Unfortunately, credit reports are highly accurate..

[TyFenn]

Originally Posted by RANDY P

I've seen 'em pop up making legitimate lates dissapear.. Credit repair does not make the issue go away, it just masks it.

Unfortunately, credit reports are highly accurate..

--In my experience, credit reports are NOT always accurate. For example, I've seen credit reports showing a 90 day late but no 30 or 60 day late payments. In this case, I was able to get that removed and had the corresponding increase in credit score. It is my advice to NOT always 'trust' the credit bureaus.

Further, while it is legal to 'piggyback', it is my understanding that FICO is going to alter the 'formula' that they use to minimalize (sp?) this effect.

Finally, there are much cheaper companies than tradeline that will facilitate this situation. My guess is that you might have a family member who will allow you to 'piggyback' on their credit. Go there first, save yourself some money.

Fraud, it is not.


Either way, best of luck.

[Rick Lee]

Of course, credit reports are not always accurate. And a 90 day late does not necessarily mean there has to be 30 or 60 day lates too. I think what Randy means is that credit reports, for all their flaws, tend to accurately reflect a borrower's ability and willingness to repay creditors. They usually go to character.

[TyFenn]

my misunderstanding...

[RANDY P]

Originally Posted by TyFenn

--In my experience, credit reports are NOT always accurate. For example, I've seen credit reports showing a 90 day late but no 30 or 60 day late payments. In this case, I was able to get that removed and had the corresponding increase in credit score. It is my advice to NOT always 'trust' the credit bureaus.

Further, while it is legal to 'piggyback', it is my understanding that FICO is going to alter the 'formula' that they use to minimalize (sp?) this effect.

Finally, there are much cheaper companies than tradeline that will facilitate this situation. My guess is that you might have a family member who will allow you to 'piggyback' on their credit. Go there first, save yourself some money.

Fraud, it is not.


Either way, best of luck.

Actually, to obtain credit based on a repayment history that isn't yours is in fact illegal- it's a basic premise backed up with a signature on the 1003. Those liabilities are declared It may not be illegal for a bank to put you on there and report it as such, perhaps it isn't illegal to have your FICO based on that but for you to represent it as yoru history can get you thrown in jail.

2nd thing, if the borrower was late, and you manage to get it knocked off, does that change the fact he still missed the payment? What about collections? Charge offs? A full on FC? Judgement?

If you take advantage of that loophone and it gets knocked off, does that mean it doesn't exist?

Like I said, it's fraud.

rjp