Borrowers who seek FHA insured home loans are required to submit credit, employment and income information to the lender in order to be approved for the loan.
The borrower’s information is reviewed by the lender, but must also be verified to insure the information is current and accurate. In addition to verifying the information submitted, the lender is also required to get credit reports on the borrower. But what happens when the borrower disputes information on a credit report?
For example, if a credit report states that a collection action is outstanding, but the borrower claims the bill has been paid, the lender may be required to use something called a Residential Mortgage Credit Report (RMCR) instead of the standard credit report known as a three repository merged credit report or TRMCR.
In such cases, the RMCR is usually needed when supporting data isn’t available. If the borrower claims a judgment or claim has been paid, but can’t show a “paid in full” notice, the RMCR would be the lender’s choice to verify that information.
According to the FHA official site, “A residential mortgage credit report (RMCR) is required when the borrower disputes the ownership of accounts on the TRMCR borrower claims that collections, judgments, or liens listed as open have been paid, and documentation supporting his/her claim is not available…borrower claims that certain debts on the TRMCR have different balances/payments, and current statements less than 30 days old supporting his/her claim are unavailable…”
A lender may also decide to pull a Residential Mortgage Credit Report when it’s deemed “more prudent” to use one instead of the TRMCR. The Residential Mortgage Credit Report must provide detailed information on employment, income, and credit, much like the standard report.
This type of credit report is just another tool for lenders when approving borrowers for an FHA insured mortgage–the FHA rules for this type of report build in additional flexibility to the FHA loan process. It insures the borrower gets a fair review of credit instead of stopping the process when there’s a dispute over paid claims or other conditions that might warrant a look at the RMCR.