When it comes to assessing mortgage risk, today’s lenders face a notable blind spot: public record data. Since 2017, most tax liens and civil judgments have been removed from consumer credit reports, making it difficult for lenders to evaluate applicants’ financial obligations.
While this change has benefited some consumers by increasing their credit scores, it has simultaneously introduced more risk into the lending process. That’s where Liens & Judgments Reports can bridge the gap.
In this article, we’ll explain exactly what liens and judgments are, why they no longer appear on traditional credit reports, and how Certified Credit’s Liens & Judgments Report can help lenders make more informed, compliant decisions.
Table of Contents
What is a Lien?
A lien is a legal claim placed on a person’s property to secure the repayment of a debt. It grants the creditor the right to seize or sell the property if the debtor fails to meet their financial obligations.
Some common types of liens include:
- Mortgage liens, which apply to a specific piece of property. Borrowers agree to these liens when they take out a mortgage loan.
- Tax liens, which are involuntary claims placed by the IRS or local tax authorities when someone fails to pay outstanding taxes. They attach to real estate or other assets until the debt is resolved.
- Mechanic’s liens, which can be filed by service providers who aren’t paid for work they performed.
- Judgment liens, which we’ll explain in more detail below.
What is a Judgment?
A judgment is a legal decision issued by a court to resolve a dispute. In the context of consumer lending, it means that the borrower is legally obligated to repay a debt to a creditor.
Once a creditor secures a court judgment, they can file a judgment lien against the debtor’s real estate or personal property. This involuntary lien gives the creditor a legal claim to the proceeds if the property is sold or refinanced, helping them recover the unpaid debt.
Judgment Lien Example
To clarify how judgment liens work, let’s take a look at a real-world example: A homeowner wants to refinance their mortgage to take advantage of lower rates. They have a strong credit score, thanks to their low credit utilization and reliable payment history.
However, the homeowner has a lien on their property stemming from an unpaid debt to a contractor from several years prior. After a lawsuit, the court issued a judgment against the homeowner, and the contractor filed a judgment lien on their property.
Before the homeowner can complete the refinance, they must resolve the lien by paying off the debt. If not addressed, the lien could complicate the title clearance process and delay the loan closing.
Read More: How to Tackle Wire and Title Fraud
Why Don’t Liens and Judgments Appear on Credit Reports Anymore?
Back in the day, civil judgment and tax lien data were featured on credit reports, making it easy for mortgage lenders to factor it into their risk analysis. However, the three major credit bureaus—Experian, TransUnion, and Equifax—removed most of this data from credit reports in 2017, along with tax lien data in 2018.
The change was part of the National Consumer Assistance Plan (NCAP), a joint initiative by the credit bureaus to improve the accuracy of credit reporting. Lien and judgment records often lacked personal identifiers, such as full names, Social Security numbers, or dates of birth, making it difficult to match them to the correct consumer. To ensure more accurate reporting, the bureaus decided to exclude this data from credit reports altogether.
While this change improved data privacy and accuracy, it also created a major data gap for lenders. Without access to liens and judgments, lenders must rely solely on tradeline data to assess risk, which can paint an incomplete picture of a borrower’s financial obligations.
Do Liens Still Affect Credit Scores?
Since tax and judgment liens are no longer included in consumer credit reports, they don’t impact credit scores directly. However, they often affect credit indirectly through related factors, such as:
- Missed payments – Liens imply that a borrower has failed to repay their creditor on time. When these missed payments are reported to the credit bureaus, they can significantly drag down their credit scores, since payment history is the most influential credit scoring factor.
- Bankruptcies – Some liens may force a borrower into bankruptcy. If so, this data will remain on their credit reports for ten to 13 years, often causing significant damage to their credit scores.
As you can see, liens may not lower credit scores anymore, but the circumstances surrounding them certainly can.
Read More: Cracking the Code on Credit: A Complete Guide to Boosting Consumer Credit Scores
Should Mortgage Lenders Still Care About Liens and Judgments?
Evaluating mortgage applicants without reviewing their public record history is like trying to complete a puzzle without all the pieces. Thus, mortgage lenders should always look at liens and judgments during their underwriting process.
Consumers with a lien or judgment on file are twice as likely to default on future debt. As a result, failing to identify these factors early on can increase your chances of:
- Making riskier lending decisions
- Missing red flags during your underwriting process
- Facing repurchase demands or buybacks from investors for low-quality loans
Read More: Reducing Fraud and Repurchase Risk with Undisclosed Debt Monitoring
Just Take a Look at This Example
You’re considering two applicants with similar credit scores and income levels. On paper, they both appear equally qualified. However, one has a recent judgment lien, suggesting a higher default risk.
By reviewing liens and judgments in your underwriting process, you can select the best borrowers with confidence. Luckily, you don’t need to rely on the credit bureaus to uncover these public records. You can do so with ease with a comprehensive liens and judgments report, like the one we offer at Certified Credit.
What is a Liens & Judgments Report?
A Liens & Judgments Report provides supplemental information that can help fill in the gaps left by traditional credit reports. These reports aggregate data from various public record sources, including county and state courts, to identify:
- Civil judgments
- State and federal tax liens
- Bankruptcy filings
- Collections data
This information can paint a fuller picture of applicants’ financial standing, enabling you to make more informed, compliant, and confident lending decisions.
Certified Credit’s Liens & Judgments Report: Get a 360-Degree View of Borrower Risk
At Certified Credit, our comprehensive Liens & Judgments Report is designed to strengthen your risk management and support better lending decisions. It helps you uncover risks in advance with its:
- Unparalleled accuracy – Thanks to our partnerships with leading public record data providers, our reports deliver the most accurate and up-to-date information available.
- Comprehensive coverage – Along with tax liens and civil judgments, this robust report includes data about applicants’ bankruptcy filings, collections, and legal actions tied to debt.
- Robust regulatory compliance – Our Liens & Judgments Reports meet Fair Credit Reporting Act (FCRA) standards and fulfill GSE and secondary market requirements.
By leveraging our Liens & Judgments Reports, you can proactively pinpoint risks, protect your lending pipeline, and preserve your relationships with secondary market investors. Most importantly, you can protect your portfolio against delinquency and default.
Read More: The Secondary Mortgage Market: How Can You Ensure Your Loans Meet Investor Requirements?
When to Use Certified Credit’s Liens & Judgments Report
You can reference our Liens & Judgments report at several stages of your lending process. For instance, you may want to review it during:
- Prequalification – Considering the high price of credit reports, you want to eliminate unqualified borrowers as cost-effectively as possible. Checking an applicant’s lien and judgment status early on can help you filter out high-risk applicants before investing in a full credit pull or property appraisal. Read More: Reducing Loan Origination Costs Despite Rising Credit Reporting Fees
- Underwriting – Next, you may want to review our reports before extending a conditional approval to otherwise creditworthy applicants. This way you can confirm that they don’t have any hidden liabilities that may introduce delays to the closing process.
- Pre-close verification – You’re not out of the dark after closing a loan—secondary market investors can demand buybacks if they discover undisclosed liabilities. By checking in on your closed applicants’ liens and judgments reports, you can ensure no new data has emerged that may jeopardize their loan eligibility.
Read More: How to Protect Your Portfolio From Freddie Mac’s Mortgage Loan Buybacks
Rise Above Liens and Judgments Risks With Certified Credit
While liens and judgments are no longer shown in traditional credit reports, they haven’t disappeared from borrowers’ financial lives. These public record items still present meaningful risks, and ignoring them can leave you vulnerable to costly surprises.
Fortunately, our Liens & Judgments Report helps you bring this crucial data back into the picture, allowing you to protect your pipeline and deliver better outcomes for borrowers and investors alike.
Our Liens & Judgments Report is just one of the many risk mitigation solutions we offer at Certified Credit. Some others include:
- Undisclosed debt monitoring
- Wire transfer fraud reports
- ADV-120 fraud reports
- 4506-C tax transcripts
- SSA-89 verifications
- MERS reports
- ID Risk Review
- Portfolio Review
- Flex ID Smart Select Shield
Ready to close the data gap and reduce your underwriting risk? Schedule a demo of our Liens & Judgments Report and other risk mitigation solutions today!
Sources:
Consumer Reports. Credit Reports Soon Won’t Include Some Tax Lien, Civil Judgment Data.
CFPB. Removal of public records has little effect on consumers’ credit scores.
FICO. What is Payment History?
https://www.myfico.com/credit-education/credit-scores/payment-history
MortgageOrb. Mortgage Lenders’ Next Challenge: Finding New Sources For Lien And Judgment Data.
https://mortgageorb.com/mortgage-lenders-next-challenge-finding-new-sources-lien-judgment-data
