Reporting Sold Loans to Credit Repositories

December. The year is winding to a close and your institution’s employees are becoming increasingly scarce in the wake of holidays and vacations. However, there is still plenty of work to do, and now is a perfect time to make sure all your ducks are in a row before the rush of paperwork and deadlines.

Stay Organized

Credit repositories are, of course, organizations that really like their ducks organized. And keeping credit repositories happy makes life easier for you and your customers. Therefore, when the time comes to sell loans to another servicer, you want to make sure that the accounts being sold are reported correctly. Today, we’d like to take a few minutes to show you how.

CDIA guidelines explain how to report sold loans. In their Credit Reporting Resource Guide, Frequently Asked Question number 47 describes how accounts that have been sold to another company should be reported. Our system is programmed to follow these guidelines, and there is a minimal amount of preparation that is required by your institution.

Loan Bundles

Generally speaking, when loans are sold to another institution to service, they are sold as bundles. In this case, your institution will submit a work order to GOLDPoint Systems to the relevant fields on the loan accounts. However, if your institution is only releasing a handful of loans at a time, employees can manually update these fields instead as directed below (this information is also helpful to know what to look for if you need to verify that certain accounts are being processed properly).

• Hold Code of 86 must be placed on the account (to signify “Loan Sold – Servicing Released”).
• An Action Code of 106 must be placed on the account (to signify “Loan released – awaiting deconvert”) with an accompanying effective date. This code is what triggers the automatic system processing of the sale of the account.
• The Do Not Send Statements checkbox field must be marked (so the account owner will stop receiving statements for the account from your institution).
• The Service Released mnemonic (LNRLSD) must be set to “Y” in the Core Services record.
• The K2 Purchased From Sold To Indicator field must be set to code 2 (to indicate that the loan has been sold to another institution) and the Name field must contain the name of the institution buying the loan (see below).

Once the system detects Action Code 106 on an account, it processes the service release at the first month end following the Action Code date (which will become the account’s closure date). A Special Comment code will be placed on the account (code AH, to signify “purchased by another company”) and the account’s current balance, scheduled payment amounts, and any amount past due will be zeroed out. The company name that was indicated in the K2 fields will be reported in the Credit Report transmission.

CDIA guidelines

One other important field the credit repositories need, if applicable, is the Date of First Delinquency. 

“If the account is delinquent or derogatory at the time of sale, report the date of the first 30-day delinquency that led to the status being reported. If the account being sold is current and included in bankruptcy, report the date of the bankruptcy petition or notification…Additionally, if the account is delinquent or derogatory, it is imperative that you provide the date of the first delinquency that led to the account being sold to the debt purchaser.”

When necessary, GOLDPoint Systems includes the proper Date of First Delinquency according to these guidelines.

The sold account will be included in your institution’s credit reporting for the Action Date month and the following two months but will stop appearing in the report after that. Congratulations! With these steps accomplished, you’ve crossed all your Ts, dotted your Is, and you can let that loan go without any further worries.

Conclusion

GOLDPoint Systems prides itself on its commitment to customizing its services to fit your institution’s needs. This includes fulfilling work orders to mass-process service releases as well as providing options for increasing/decreasing the length of time sold loans are included in credit reports. If our products do not currently perform a task you require, contact your account representative to discuss how we can serve you better.