Most cases of short sales, foreclosures or loan mods are reporting incorrectly to the credit bureaus.
Why? One reason is that the credit reporting codes used by data furnishers (banks) are insufficient to reflect the types of issues which occurred since 2008. The current data codes, and FICO algorithms that read them, were created around 2004. There were no short sales, loan mods, or cancelled foreclosures. There were also very few cases of loan deficiencies protected under anti-deficiency law. The second reason is that there is simply bad behavior and erroneous reporting by the banks, and they are typically uncooperative.
The errors we most often see are short sales that report as charge offs or foreclosures or foreclosures that should not report a deficiency balance.
A reporting ‘code’ error in any of nine account fields can mean the difference between getting a new mortgage loan or not. There are “waiting period” requirements for every type of mortgage. For Conventional loans, even the updates to Fannie Mae’s Desktop Underwriting software (v.9.1) may not be sufficient to get the loan approved when the consumer is, in reality, fully qualified. We will often need to involve an attorney, but we are very successful at getting every field reporting correctly.