- Sunday, September 25, 2011
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- Sunday, February 27, 2011
Years after we started our mortgage business, I learned that mortgage lending was in my blood.
Somehow, it fell to me to be the keeper of the family records. I have in my files the birth certificates, death certificates, marriage certificates and divorce papers.
Sifting through all the papers belonging to my aunt, guess what I found? A credit report from the 1930s on a mortgage loan applicant, addressed to my aunt, the mortgage loan officer. I still remember what the memento looked like.
With very careful, precise, handwriting, the investigator reported his findings. He had driven to the residence of the applicant and interviewed the neighbors. His findings were favorable. The applicant and family didn't participate in raucous parties or unusual practices. Their property appeared clean with a well-tended lawn.
The interviewer confirmed that the car in the borrower's driveway matched what was reported on the application.
The report was lengthy and continued like this: It included inquiries made to the employer, banker and endorsements from personal references. Finally, it was signed and dated.
In the early 1970s, I was still in school -- first grade, I think -- when I started a part-time job at a large, new apartment complex in a suburb of Kansas City.
I learned how to pull credit reports on potential renters. Things had changed a little.
I placed a call to the credit bureau. I recited to the woman at the other end basic information about our prospective renter including name, addresses for at least two years and Social Security number. Then I hung up and waited anywhere from a couple hours to a day for a return phone call. When the call came back, I placed the phone in the crook of my shoulder and began writing on the back of the rental application.
As the credit bureau representative regurgitated the credit history, I transcribed it trade line by trade line onto our form. Each line had a rating, such as O-9 for a collection on an open account or R-1 for prompt payment on a revolving account.
Around 1983, technology began to play a part in credit reporting. We owned a professional tenant screening business.
We used a 300-baud modem. This is a rectangular device about the size of a Kleenex box. When the credit bureau called to say our report was ready, we scrunched the telephone receiver into the rubber cups of the modem. The modem was connected to a dot matrix printer which spewed out our credit reports on that big, 13-inch green bar paper.
To compare a 300-baud modem to a DSL is like comparing the utility bill on Barbie's playhouse to the $2,400 a month electric bill on Al Gore's 20-room mansion in Tennessee.
Before that year ended, our company bought its first microcomputer. With a $25 piece of software, we were now able to do what previously took a $30,000 mainframe computer which required its own air-conditioned room.
It wasn't necessary to call the credit bureau anymore. Our computer could access their computer directly and retrieve credit reports.
Modems were still in use when we started our mortgage business here in the Keys in 1988. A little faster -- maybe 1,500 baud now.
By 1993, the mortgage processing software would go out on request and retrieve the credit report and dump the data automatically into the proper loan application fields.
All this time, loan originators and underwriters were still analyzing credit history line by line. Until 2001, nobody ever heard of a FICO.
Since then, we have come to rely very heavily on FICO scores for credit worthiness. Currently, with a FICO lower than 620, you're lucky if you can get served at Starbucks.
Wouldn't my aunt's customer be surprised that a mortgage decision can be determined by a number? Wouldn't today's credit customers be surprised if the credit decision hinged on their neighbor's opinion?
What do you think?
Regina E. Corcoran, SRA, is a Florida real estate broker, state-certified residential appraiser and residential contractor. She is president of AmeriRealty Corp. and vice president of AmeriMortgage Corp. She can be reached at ReginaECorcoran@cs.com. Corcoran writes her column exclusively for The Citizen. It appears every other Sunday.