MGIC MI and the Fair Credit Reporting Act (FCRA)
The Fair Credit Reporting Act (FCRA) is a federal law that promotes the accuracy, fairness and privacy of the information in the files of consumer reporting agencies (also called credit bureaus). FCRA protects information collected by consumer reporting agencies, limits the persons who may obtain consumer credit reports, and requires users of such reports to notify consumers when "adverse action" (as defined under FCRA) has been taken on the basis of such reports. Further, users must identify the consumer reporting agency that provided the report so the accuracy and completeness of the report may be verified or contested by the consumer.
What is adverse action?
The definition of “adverse action” under FCRA is tied to the reason the consumer report was obtained. When it comes to MI, it means an insurance application is denied or a higher premium is charged based on the consumer report information. You have a right to obtain a free credit report when you receive a notice of adverse action. You also have a right to receive a free credit report, at your request, once every 12 months from each of the nationwide consumer reporting agencies. For more information about your rights under FCRA and how to obtain free credit reports, visit the Consumer Finance Protection Bureau's (CFPB's) website at consumerfinance.gov/learnmore.
Why did I get a letter about adverse action?
Lenders generally charge borrowers for the cost of mortgage insurance (MI). MGIC offers MI programs for various types of loans and credit profiles. If you receive a notice of adverse action from MGIC, it means that under the program applicable to your loan, we either decided not to insure your loan or that the premium rate we are charging for MI is higher than our lowest rate based on your credit information. Depending on how your lender recovers the cost of the MI premium on your loan, your payments or loan fees may be higher than if the MI rate had been lower.
What is a credit score?
Credit scores are numerical ratings that predict how likely you are to make your loan and other credit payments on time. Credit scores are based on the information in your credit report file at one or more of the consumer reporting agencies. The consumer reporting agencies generate credit scores using scoring models. The consumer reporting agencies use their own models to determine your credit score and do not disclose the formula behind their credit-scoring models. For more information on credit scores, visit the CFPB's website at consumerfinance.gov/consumer-tools/credit-reports-and-scores.
How do I review or dispute the accuracy or completeness of the credit report information about me?
The name and contact information for the consumer reporting agency that provided your credit score or credit information we used in our underwriting decision is included in your notice. You may contact them for a free copy of your credit report. You’ll receive information with the report on how to correct any information in your report that is wrong or incomplete. For information on how to correct information in your credit file, see the CFPB's website.
What is MI?
Lenders and mortgage loan investors typically require MI for loans when the loan amount exceeds 80% of the value of the mortgaged property. In the event of borrower default, MI reduces the loss to the lender or investor by paying all or a portion of the unpaid loan amount, interest due and expenses associated with the loan foreclosure. Private MI is not the same as mortgage life insurance, which pays off a mortgage if the homeowner dies or becomes disabled. It is not the same as homeowners’ insurance, which protects homeowners from loss due to theft, fire or other disaster. Private MI protects the lender and investor from loss, not the borrower. Private MI is the private-sector alternative to Federal Housing Administration (FHA) mortgage insurance, a government program backed by taxpayers. Private MI typically may be cancelled sooner than FHA insurance and is available on a wider variety of loan products.
Who is Mortgage Guaranty Insurance Corporation?
Mortgage Guaranty Insurance Corporation (MGIC) is a leading provider of private mortgage insurance. We are the founder of the modern mortgage insurance industry, and we help make homeownership possible for millions of families. For more information about MGIC, visit mgic.com/about-mgic.
I did not give you permission to order a credit report about me, so how did you get my credit report?
The Fair Credit Reporting Act restricts the purposes for which consumer reporting agencies may provide credit reports. You may provide written instructions authorizing a consumer reporting agency to provide your credit report to another person. However, under FCRA, consumer reporting agencies may also provide your credit report to certain persons, including creditors and insurers in connection with your request for credit or insurance. Because MGIC underwrites mortgage insurance requested in connection with your loan application, MGIC is permitted under FCRA to obtain your credit report.
Can my MI premium change if my credit score changes?
The rate MGIC charges your lender for mortgage insurance is based on information provided to MGIC by your lender. Corrected information received before closing can affect the mortgage insurance premium. However, the insurance is effective when the loan is closed. Correcting erroneous information in your credit file is important and may improve the terms of credit and insurance offered to you in the future.