I'm not easily blown away by anything I read these days. But I just read a post on The Butterworth Group Blog that floored me…
An Associated Press article titled, "Bad Credit, Use Someone Else's, and this Little-know Loophole, to Buy a House", appears on AZCentral.com today (and 233 other news sites).
In a nutshell: There is a company out there that (for a hefty fee) will connect two people — one with poor credit and one with excellent credit. Mr. Poor Credit is simply added to one of Mr. Excellent Credit's accounts as an "authorized user". The credit bureaus then see Mr. Poor Credit on an account in good standing and *poof* up goes Mr. Poor Credit's FICO score.
Just like magic. And with no effort what-so-ever on Mr. Poor Credit's part. Well no effort other that taking a crow bar to his wallet and forking out $900 bucks — a portion of which now lines Mr. Excellent Credit's pockets.
My first question was simply, "is this legal"??? Apparently it is. For now.
My second question was really more of a statement: This is fraud, plain and simple.
Read the article. There's an example of a real estate agent / mortgage broker that did this and raised his FICO score from 550 to 715 and secured a mortgage based on his completely falsified FICO score. (wonder if he did his own loan too?)
Now there are many who say that lenders put too much emphasis on FICO scores. And there may be some plausible arguments for that case. But that does not change the fact that "renting" someone's credit, "piggybacking", what ever you want to call it is wrong. Is is fraud.
All multifarious means which human ingenuity can devise, and which are resorted to by one individual to get an advantage over another by false suggestions or suppression of the truth. It includes all surprises, tricks, cunning or dissembling, and any unfair way which another is cheated.
Source: Black’s Law Dictionary, 5th ed., by Henry Campbell Black, West Publishing Co., St. Paul, Minnesota, 1979.
I'd love to hear other's opinions on this, particularly some of our Mortgage Broker / Banker readers out there.
Updated: I'm no attorney. In *my* book this is fraudulent activity. Is it legal fraud — I can't say, though it has got to be really toeing the line if it's not crossing it. It's most certainly "moral fraud". Check out the comments as some lending folks begin to chime in…
[tags]mortgage fraud, FICO scores[/tags]