Shaw v. Experian Information Solutions, Inc.
Facts: A distressed homeowner short sells their property which was secured by a mortgage. A credit reporting agency (CRA) accurately reports this on the homeowner’s credit report using a proprietary code format. Fannie Mae’s credit analysis software misinterprets the CRA’s code format and treats the short sale as a foreclosure. The homeowner attempts to obtain a mortgage but is denied because the lender is using Fannie Mae’s credit analysis software. The Fair Credit Reporting Act (FCRA) imposes penalties on CRAs which misrepresent consumer information.
Claim: The homeowner seeks money losses from the CRA, claiming it violated the FCRA since it misrepresented the short sale of their home as a foreclosure to Fannie Mae.
Counterclaim: The CRA seeks to avoid paying a penalty, claiming it did not violate the FCRA since it accurately reported the short sale to Fannie Mae.
Holding: A California court of appeals holds the homeowner is not entitled to money losses from the CRA since it accurately reported the short sale in accordance with FCRA regulations. [Shaw v. Experian Information Solutions, Inc. (May 29, 2018)_CA5th_]
Editor’s note — Fannie Mae’s incorrect classification of the short sale as a foreclosure had significant negative consequences for the homeowner’s creditworthiness. It imposed a seven-year waiting period on obtaining a new mortgage when it should have been two years.