One of the nation's largest suppliers of funds for home loans has issued a stern warning to the companies which service mortgages on its behalf to cease forgetting to report to credit agencies that borrowers are making their payments on time.

Some loan administrators report only delinquencies in an effort to protect themselves from losing their best customers to lenders who might try to borrowers to refinance by dangling lower rates in front of their eyes. Because timely payments are omitted, the better borrowers do not have complete and accurate record records and, therefore, are less susceptible to being picked off by the competition.

The vast majority of servicers report on-time as well as late payments. But Freddie Mac, one of two major government-sponsored financial institutions which act as intermediaries between local lenders and investors worldwide, has still found it necessary to advise those it works with that it requires full reporting.

Furthermore, the company is stepping up its audit review efforts to catch servicers who don't play by the rules.

Full reporting, as far as Freddie Mac is concerned, includes recently originated mortgages, current and delinquent mortgages and mortgages that have been liquidated (as opposed to being paid off) through workout options, foreclosures and charge-offs. Failure to comply with its rules, Vice President Margaret Colon said in a memo last week, could result in fines and suspension or even termination.

"Reporting of complete credit information about a borrower ensures that future credit decisions...will be made fairly and inefficiently," Colon explained. "Incomplete credit information could harm the borrower's ability to obtain appropriate credit at a reasonable cost."

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Published: February 29, 2000

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