Secondary Use
What is Secondary Use?
Amidst the backdrop of increased legislative scrutiny of consumer privacy rights, and with the practice of electronic file sharing in the automated underwriting process, the three national Repositories (Experian, TransUnion, and Equifax) now require that all mortgage credit reporting agencies comply with specific procedures to track and report Secondary Use of consumer data by lenders. Secondary Use in the mortgage lending industry refers to the process when a credit report, in part or in its entirety, is provided to another entity or entities as part of the lending process. Secondary Use occurs when a lender or broker provides all or any portion of the consumer credit information contained in a merged or single credit report to an entity other than the end-user for which the credit report was originally prepared. These policies for Secondary Use Inquires (SUI) were designed by the Repositories to address concerns for consumer privacy rights, FCRA compliance, and to address data security issues.
What are some examples of Secondary Use?
- Mortgage brokers who order a credit report and then deliver a copy of that report to a Wholesale lender.
- Lenders who order a credit report and then request a copy of that report be sent to Desktop Underwriter or LP.com.
What is the purpose of Secondary Use?
The three national repositories, Equifax, TransUnion, and Experian, created these policies to address issues regarding FCRA compliance and data security as well as providing to consumers an accurate list of entities that have viewed their credit information.
Will my borrower’s score go down due to additional inquiries?
The answer is NO for two reasons. First, these Secondary Use inquiries are considered “soft” inquiries meaning they do not impact the score and will only appear when the consumer orders their own personal credit report. Second, credit is not re-accessed when reports are reissued to a lender so credit scores will not change.
How much are Secondary Use fees?
$4.50 for an Individual Trimerge Report $9.00 for a Joint Trimerge Report
Will this replace my re-issue fees from the GSE’s and other automated underwriting systems?
No, the Secondary Use fee is in addition to your standard electronic reissue fees.
Do other CRAs charge this fee?
Since this is fee charged to all credit reporting agencies from TransUnion, Equifax and Experian, you can be assured that all companies will be passing along this fee.
Am I allowed to pass this cost along to the borrower? Yes
Is there a way to avoid multiple Secondary Use charges? Shopping to multiple lenders.
If you are submitting a consumer’s file to multiple lenders you cannot avoid multiple Secondary Use charges. The process requires that each lender be recognized as a Secondary User via the soft inquiry process, meaning that you will be charged for each instance of secondary use.
What are some possible scenarios where Secondary Use Fees will be charged?
First Scenario – A Kroll Factual Data credit report is reissued to wholesale lenders with access to Fannie Mae or Freddie Mac. The GSE’s will report each wholesale lender who receives the credit file as a Secondary User. In this case, Kroll Factual Data will bill a Secondary Use fee for each of the secondary users.
Second Scenario – A credit report is sent to multiple lenders based upon the underwriting criteria for each lender through a multi-lender platform to
qualify a consumer for multiple loan options. In this scenario, the primary broker is the End User. Each lender that receives the credit report will be posted as a Secondary User. Kroll Factual Data will bill a Secondary Use fee for each of the secondary users.
Third Scenario – A copy of the original credit report is requested by a Secondary User. An example would be when a wholesale lender with a reference number requests a credit report through Kroll Factual Data that was previously issued to a mortgage broker. In this case the repositories will post a soft inquiry for the Secondary User and Kroll Factual Data would bill a Secondary Use fee.
