Cornerstone Mortgage, Inc.

Initial Business Response /* (1000, 8, 2015/10/01) */

Cornerstone Mortgage, Inc(CMI) previously worked with the consumer and our credit report provider between the dates of 08/18/and 01/09/to update this information on the consumer’s credit profile. During this process CMI provided documentation to our credit provider stating that,
while we did have verbal authorization for the original hard credit inquiry performed on 06/01/2017, the hard credit inquiry performed on 08/14/was the result of a miscommunication and was in error. At this time we requested for the inquiry to be removed from the consumer’s credit profile, and this request was communicated from our credit provider to the three credit bureaus (Transunion, Experian, and Equifax). Unfortunately the decision to remove or adjust any credit inquiry cannot be made by CMI or our credit provider. That decision is fully at the discretion of the three credit bureaus, and our ability to influence their decision is limited. CMI worked persistently to correct this matter. We quickly provided all requested and required information during the process, and we made numerous follow up inquires to our credit provider requesting the status of a resolution. The extended time it took to resolve this matter was due to atypical turnaround times for reviewing credit disputes at some of the credit bureaus As of 01/09/CMI was informed by our credit report provider that the 08/14/hard credit inquiry in question had either been removed from the consumer’s credit profile or changed from a hard credit inquiry to a soft credit inquiry at all three credit bureaus. Soft credit inquiries do not affect a consumer’s credit score, do not typically show up on a consumer’s credit report when it is accessed by other lenders, and may be performed without a consumer’s authorization. In fact, it is quite common for any consumer to have numerous soft credit inquiries performed on their credit profile during any year for things like prescreened offers of credit, background checks, and other promotional offers. On 01/09/2018, CMI was informed by our credit provider that the effects of a soft credit inquiry were explained to the consumer and that, at that time, they seemed to understand that a soft inquiry would not have an effect on their credit score or profile CMI feels we have taken all necessary and available steps to correct this error and that the consumer’s desire to not have the 08/14/inquiry affect their credit history when they apply for future mortgage financing was met on 01/09/ Below are two articles from the credit bureaus that further explain the effect of and differences between a hard credit inquiry and soft credit inquiry and excerpts from those articles illustrating that a soft credit inquiry does not affect a consumer’s credit score- https://www.transunion.com/blog/credit-advice/the-difference-between-hard-and-so...⇄ o “Effect on Credit Score: When it comes to your credit score, the only type of inquiry you have to worry about is a hard inquiryA soft inquiry does not affect a credit score at all, since it’s not an application for credit.” - https://www.experian.com/blogs/ask-experian/credit-education/report-basics/hard-...⇄ o “Because soft inquiries aren’t linked to a specific application for new credit, they’re only visible on your credit report to youPotential lenders won’t be able to see them (except insurance companies may be able to see other insurance companies’ inquiries), and soft inquiries are never considered as a factor in credit scoring models.” CMI management has spoken with the employees involved with the original error in order to prevent future reoccurrence. If any further information is needed, please contact me at the information below Thank you, *** *** Director of Compliance Cornerstone Mortgage, Inc***@cornerstonemortgage.com *** *** ** *** ** *** *** ***, Chesterfield, MO

Loan number for updated loan application in was *** Following is an overview of the history on this loan number, per our loan origination system.2/5/2016-Mr*** requested a pre-approval for an increased loan amount (from the prior pre-approval request in 2015), to $100, A pre-approval letter was issued for this amount Mr*** executed a purchase agreement with sellers, to purchase a home, and this loan was subsequently submitted to our processing department on 3/11/ There is a note dated 3/28/2016, in our loan origination system that states, "Hold on file-Borrower will let us know soon if he will be going thru with the loan Seller will not fix anything so buyer will probably be looking for another property." It was discovered that Mr*** had two investment/rental real estate properties that were not reflected on his credit bureau report This caused a downgrade of the loan file to a manual underwriting process, per FHA guidelines, so an automated underwriting system could not be utilized as previously thought The loan application could not be approved with a manual underwrite due to the high DTI (Debt To Income) Ratio that existed The loan was declined on 4/21/per notes in our loan origination system The reasons for decline were not based on the previous short sale They were based on a high DTI Our loan officer who was working with Mr*** at the time, felt empathy for his situation and recommended that he try other mortgage lending companies or banks that might be able to get his loan approved, which is what ultimately happened Unfortunately it seems that they could not approve his loan application either Mr*** could try to pursue a refund of his earnest money with the sellers that were involved in this transaction Unless he was out of contract per their executed purchase agreement, they should be willing to refund his earnest money Regarding his rental payments, the initial pre-approval letter dated June 11, 2015, for a loan amount of $75,605.00, stated that the mortgage loan for *** *** did need to be paid off prior to a closing to purchase a new property This was due to a high DTI, and several other accounts needed to be paid in full before a loan approval could be issued Ultimately it was the excessive DTI along the unreported rental properties that caused this loan to be a credit that could not be approved by an underwriter. Please let me know if I can be of further assistance with this matter.Sincerely, *** ***, Director of Compliance, Cornerstone Mortgage, Inc

Complaint: [redacted]
I am rejecting this response because:!st: my loan was never denied by your company, it was moved for reason never explained. So does that mean I can get a mortgage loan with you despite the short sale? If the price meets guidelines?  2nd: I was issued a pre approval letter for sales price of 100,000. 3rd: my scores met your approval when I applied and through the process and when I zero balanced accounts it should have risen.Would like to speak with someone from Cornerstone, feel free to contact me at [redacted]
Sincerely,
[redacted]

Initial Business Response /* (1000, 7, 2015/10/27) */
Dear Ms. [redacted]
Cornerstone Mortgage, Inc. has reviewed the complaint filed by Ms. [redacted] regarding our inquiry of her credit history on September 8, 2015.
At the time, [redacted] was working with a realtor to list her home for...

sale. The realtor selected to be the listing agent was [redacted] is a licensed Loan Officer and Branch Manager for Cornerstone Mortgage, Inc. [redacted] contacted [redacted] about speaking with [redacted], regarding a potential loan preapproval. Mr. [redacted] then spoke with [redacted], and they discussed potential options for loan preapproval. During this conversation [redacted] provided [redacted] with the personal information necessary to run a credit inquiry, including Birth Date, Address, and Social Security card number, as well as verbal authorization to submit a credit inquiry. [redacted] followed up by submitting a credit inquiry, which is now reflecting on [redacted]'s credit report.
Since Ms. [redacted] provided a verbal authorization, along with individual identifying information, we cannot request removal of this credit inquiry from her credit history report. We regret that Ms. [redacted] was not completely satisfied with her experiece with Cornerstone Mortgage, Inc. We take all consumer complaints very seriously. In addition, we strive to provide the best possible service to our clients, as exemplified by our 97% customer approval rating.

Complaint: [redacted]
I am rejecting this response because:
The reason for the rejection is because there was no communication between myself and cmi. On 8-13-17 or for that matter any time after the original inquiry. Until the inquiry was discovered by myself.  Also there was misleading information and direct lies provided to the credit agencies that I feel may have determined how they removed the inquiry. I don’t believe that speaking to the employees that caused this issue is sufficient enough. There are several reviews of this company doing the identical thing to other consumers. I feel like this whole situation is a way for this company to lock people in before they have a choice of mortgage company’s. A realtor should not be able to contact a company and have a hard inquiry placed with out any such communication toward the realtor or cmi. I do however feel like this is going to be the extent of this situation unless someone takes legal action against cmi, due to there experiences and doing this to previous consumers. Thank you to the Revdex.com for protecting the consumer and demanding a response. 
Sincerely,
[redacted]

Revdex.com:
I have reviewed the response made by the business in reference to complaint ID [redacted], and find that this resolution is satisfactory to me.
Sincerely,
[redacted]

Cornerstone Mortgage, Inc. (CMI) does not feel our communication to the credit bureaus was misleading or contained any material misrepresentations.  The information in the letter we provided to the bureaus appears valid based upon our records and discussions with the employees involved.  Neither the letter to the bureaus nor our previous response to this complaint made any claim that we had communicated directly with the consumer in order to obtain a second authorization prior to the credit inquiry on 8/13/17.  The letter stated we had advised the consumer on actions they could take to improve their credit profile after the original credit inquiry in June, and we were mistakenly under the impression that they had made improvements and wished for an updated inquiry to be made to determine the effects of those improvements.CMI does not typically provide public details of disciplinary action against employees, however, we do feel our actions in this situation were appropriate.  Federal regulations relating to credit inquiries do not actually require a company or loan officer to obtain consumer authorization prior to performing a credit inquiry.  These regulations only require a company to have a permissible purpose for a credit inquiry, and it could be interpreted that CMI had a permissible purpose for the 8/13/17 credit inquiry based on the discussions that originally occurred in June.   The employees involved were under the assumption that the 8/13/17 credit inquiry was acceptable due to the authorization given and permissible purpose established in the previous conversation with the consumer.  While it is likely that this assumption was technically accurate, we have taken this opportunity to educate these employees further on the customer service implications of such inquiries.  We have also informed them that an additional authorization should be obtained for subsequent credit inquiries in order to conform to the underlying spirit of our internal policies, which do require employees to go above and beyond regulatory requirements by obtaining an authorization for credit inquiries.  These employees also worked diligently to assist the consumer with adjusting the credit inquiry to a soft pull once the issue was brought to their attention.  Because of these reasons, we do not feel additional disciplinary action is warranted.Regarding the comment stating “there are several reviews of this company doing the identical thing to other consumers”, we do not feel this statement is accurate.  While it is true that CMI has received a relatively small number of past complaints related to disputes of credit inquiries, we have almost universally demonstrated that such inquiries were performed in compliance with credit reporting regulations and that the related complaints were either frivolous in nature or the result of the consumer having an incomplete understanding of credit reporting regulations and how credit inquiries affect their credit profile.    CMI regularly performs five hundred to a thousand credit inquiries a month, and it is not unexpected for any company with this volume of credit inquires to regularly have some of those inquiries disputed for various reasons even if they were performed in a compliant manner. It is also inaccurate that CMI in any way uses credit inquiries to attempt “to lock people in before they have a choice of mortgage companies”.  If CMI, or any company, attempted to do this it would result in an overwhelming amount of consumer disputes and complaints, and such actions would quickly be addressed by their credit provider.  Doing this would also not produce the proposed result because credit inquiries have almost no effect in locking a consumer into a company.  This is because of the way mortgage inquiries work.  Specifically, if multiple mortgage companies pull a consumer’s credit in any 45 day time period, those inquires only count against the consumer’s score as a single inquiry, and mortgage inquiries do not affect a consumer’s score until 30 days after the inquiry, so there is ample time for a consumer to have another company pull their credit without the inquiry from the first company affecting their score.  Due to these reasons, there is no benefit for a mortgage company being the first one to pull a consumer’s credit.We feel the credit bureaus decision to update the hard credit inquiry to a soft credit inquiry was the proper and appropriate action for this situation and that this change fully meets the consumer’s desire for the inquiry to have no adverse effect on their credit profile when they attempt to obtain future financing.  Companies are able to make soft inquires on consumers for many reasons, and they are not required to obtain any type of permission or inform the consumer before making these types of inquiries.  This is because, as previously communicated, soft inquires do not have a negative effect on a consumer’s credit profile.  Because of this allowance, CMI could have chosen to request an update to the 6/1/17 inquiry on 8/13/17 instead of requesting a new hard inquiry.  If this action had been taken, it would have been a soft inquiry on the consumer, and this would have been the same end result as the bureaus’ decision to change the 8/13/17 hard inquiry to a soft inquiry.  The reason we did not originally process it as a soft inquiry was because, while that would have shown us the improvements that had been made the individual accounts, it would not have provided information on what effect those changes had on the consumer’s credit score.I hope this addresses all of the concerns communicated in the original complaint and the response.  If you need any further information, please contact me at the info below. [redacted]Director of Compliance Cornerstone Mortgage, Inc.[redacted]@cornerstonemortgage.com[redacted], Chesterfield, MO 63005

Directly following are the parameters under which Mr. [redacted] received a pre-approval, based on limited information:702 Credit Score $77,000.00 Purchase Price $74,305.00 Loan Amount Reserves $1382.53Directly following are the parameters under which Mr. [redacted]'s subsequent complete loan application,...

(including a subject property address after execution of a purchase contract), was declined:688 Credit Score $102,500.00 Purchase Price $98,912.00 Loan Amount Reserves $1482.74The credit score drop was significant enough to make a difference in the loan decision, but the difference in the reserves amount was insignificant.  The change in the loan decision was not based on either of these items.   The purchase price and loan amount increased significantly, which impacts the DTI (Debt To Income ratio).  This is one of the main qualifying factors for a mortgage loan decision.  Mr. [redacted]'s loan was declined for the following three reasons: Insufficient Income For Total Obligations, Unable To Verify Credit References, Excessive ObligationsThe loan decline was based on the increased purchase price, loan amount, and resulting increased DTI, not the credit score drop or the fact that there had been a subsequent short sale.  These reasons for decline were included in the notice that was provided to Mr. [redacted].Please let me know if I can be of further assistance with this matter.Sincerely,  [redacted] Director of Compliance Cornerstone Mortgage, Inc.