What is an Address Discrepancy Letter?
Address Discrepancy Letter is a letter of explanation where the borrower clarifies the current residential address and responds to any discrepancy in the address stated in credit report or other documents. A lender may typically ask for this letter when the current residential address provided on the loan application is different than the address shown on the credit report.
The discrepancy in the addresses may be due to any of the following reasons:
- Previous addresses are reported on the credit report or other documents.
- Address for a vacation home or an investment property is reported as current address on the credit report or other documents
- There is a typographical error in the address information.
Since most address discrepancies are due to previous addresses, the letter is also referred to as Letter of Explanation for Previous Addresses.
The purpose of the Address Discrepancy Letter is to confirm the correct residential address and obtain clarifications for other reported addresses. This letter will address following concerns:
- Primary Residence: If the loan is for a primary residence, the letter will assist in confirming that the borrower is residing in the property.
- Fraud: The letter acts as a check for potential fraud such as identify theft or mortgage fraud (example, undisclosed property and/or loans against such property).
- BSA/AML: The correct address of the borrower is required for Customer Information Program (CIP) purposes under BSA/AML.
Contents of the Address Discrepancy Letter
The Address Discrepancy Letter may contain the following information:
- Loan Information: Borrower(s) name, loan number, and date.
- Current Address: The current residential address of the borrower.
- List of Other Addresses: List of all other addresses that have been reported as current addresses.
- Signature: Signature of the borrower.
Completing the Letter
You may want to keep the following in mind:
- Ensure all the addresses listed on the letter are correct.
- To prevent fraud, cross out all blanks fields that are meant for adding additional addresses. This will prevent someone from maliciously or improperly adding another address.
- If you do not agree with an address being a place you have lived, then cross it out and provide a brief explanation such as "not my current or previous address". The lender may ask for additional information.
Correction on Credit Report
You may want to obtain a copy of your credit report and file a dispute to correct the current address.
Preparing the Letter
Address Discrepancy Letter is generally prepared by the processing department and sent to the borrower. Some lenders send a template with pre-populated information asking the borrower to complete and sign the letter. Others simply ask a borrower to write a letter on their own. There is no requirement to choose a particular method, even though a pre-populated form may speed up the process. However, do not fill in the information for the borrower. Have them explain the address discrepancy.
Reviewing the Letter
Consider the following as part of your review of the letter.
- Compare the address list on the Address Discrepancy Letter with the schedule of real estate on the loan application (Fannie Mae Form 1003 ).
- Compare the mortgage loans reported on the credit report to the schedule of real estate on the loan application.
The expectations under the BSA/AML Customer Identification Program (CIP) requires a lender to maintain identifying information obtained at account opening for a period of five years after the account is closed. The identifying information includes, among others, address information. Therefore, whenever there is a discrepancy in the current address of the borrower, the lender should make efforts to obtain the correct address and maintain customer correct address information in the customer records system and loan file.
Most address discrepancies are due to mundane reasons such as previous address, typos, and incorrect reporting to credit reports. However, the discrepancies may also be a red flag for potential identify theft or mortgage fraud; especially if the borrower is being evasive in providing clarifications or there is other documentation that seems to indicate the information provided by borrower is incorrect. If you have any concerns then you may consider taking additional steps such as:
- Ask the borrower to provide proof of residence through documents such as utility bill, etc.
- Obtain a personal report from sources such as LexisNexis.
The letter clarifies the current residential address and explains any discrepancy in the address stated in credit report or other documents.
Use in Mortgages
The letter helps in explaining the differences in current residential address between different documents. It is used for underwriting, Fraud and BSA (CIP) purposes.
- Address Discrepancy Letter
- Previous Addresses Letter
- Letter of Explanation for Previous Addresses
- LOE Address Discrepancy
- LOX Address Discrepancy
Life Cycle Stage
Not required by regulation. However, maintain the document as long as the loan is outstanding.
Not required by regulation