Loan Modifications Hit Credit Scores

By
Real Estate Agent with Century 21 Prevete Real Estate

Loan Modifications Hit Credit Scores


Applying for a mortgage modification and being in a months-long trial period can devastate a home owner's credit score.


Under the government plan, troubled borrowers can have their mortgage payments reduced to 31 percent of their pre-tax income. They are first put in a trial modification for several months to test whether they can meet the requirements of the new mortgage.


Borrowers who were previously current on their mortgages will see their FICO scores fall about 100 points while they are in the trial period, according to the Treasury Department. Borrowers who were previously late or missed payments will see their scores fall more, the government says.

The longer a borrower is in the trial period, the greater the impact on their credit scores, Once the modification is approved, the borrowers' mortgage credit status will be listed as current and that should improve their scores, the Mortgage Bankers Association explains.


Even so, the delinquency remains on credit reports for up to seven years and can make getting credit for something else like a car difficult and expensive, borrowers report.


Source: CNNMoney.com, Tami Luhby (12/28/2009)

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Rainmaker
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Jeana Cowie
RE/MAX Real Estate Limited - Paramus, NJ
Broker Associate, ABR, CRS, GRI, SRES

Hi Andy,

Wow, I did not know this. Thanks for posting.

 

Dec 29, 2009 01:48 PM #1
Rainer
186,375
Andy Yakubovsky
Century 21 Prevete Real Estate - Wantagh, NY

Jeana - It's amazing what you can learn on the internet.

Dec 29, 2009 01:56 PM #2
Rainmaker
149,705
Michael J. Gallo
Florida Luxury Realty - New Port Richey, FL
Florida Luxury Realty - Gulf Home Sales Team

Andy, This Is Excellent Information.  Understanding ones credit is Huge and so many people don't. 

Dec 29, 2009 02:05 PM #3
Rainer
67,571
Randall Filbert
Filbert Real Estate Team - Boise, ID
Filbert Real Estate Team

The Loan Modification industry is still in its' infancy and changes to programs occur frequently.  For many homeowners  a Loan Modification seems to be a better alternative to letting your house go into shortsale or foreclosure.  If you are considering a Loan Modification, keep yourself up-to-date with the changes in the industry during the application period. 

Dec 29, 2009 02:44 PM #4
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Rainer
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Andy Yakubovsky

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