Mortgage-Mod-Monster

More mis-information corrected on credit score implications of a mortgage modification

Periodically I see an article that laments the spectre of a mortgage loan modification damaging a borrower’s credit score. Invariably, the reporter gets it half right. Unfortunately , the administrators at the big three credit bureaus are recalcitrant and unavailable for comment. The credit score biz is not much more than a computer. If you want real credit score answers, you have to deal with Hal. Everyone should know how that turned out.

As impetus for this article, I use “Digging Yourself Out of a Mortgage Mess,” published in the online Wall Street Journal. The article is linked below.

Lenders who took TARP money are beholden to HAMP. Many mortgage modifications outside the HAMP guidelines are being accomplished by the adept national attorneys I represent. The task is to convince the lender that it is in THEIR best interest to modify, rather than foreclose.

Once the homeowner gets over the notion that the lender is on their side, reason takes over and we can do something for them. As long as the homeowner believes that the federal government is there to save them, or that the lender is just waiting to help them; not much can be done.

There are lenders out there that are advising borrowers to miss payments. The magic phrase here is “demonstrate imminent default.” Each lender interprets this phrase differently, and they may change their definition daily.

Here is the bottom line: If you miss payments or make partial payments on the terms of your current mortgage, as in the infamous three month trial period, your partial, or lack of payments, will be reported to the bureaus as just that. What this ultimately means is that A) the sooner the homeowner starts mortgage modification negotiations, the better for their credit score. and B) A qualified, national attorney will preserve your credit as much as can be done, mostly by insisting on a timely response to your modification application and knowing the rules as well, or better, than your lender.

Once your modification is accepted, the new terms will be reported to the bureaus. There is no excuse for your lender not reporting new terms. A modification does not in and of itself reflect your payment history. Only your adherence to whatever current terms can be reported. A national attorney with a federal marshal just waiting to serve papers on a non-attentive lender will assure that.

Pay your new mortgage terms on time and any damage to your credit history will recover. It certainly is better than losing your home, isn’t it?

A year from now, as all those successful modifications start revealing themselves in the computer-formerly-known-as-Hal, the nation’s scores will recover. There is a paragraph that more or less reflects this in the referenced article.

Joanne Gregory of Fresno, Calif. made the mistake of trusting her lender to be professional her. Poor Joanne. A national attorney wouldn’t have let that happen. Keep trusting CitiMortgage, Joanne. I’m sure they meant well.
(“Sorry” they said.)

A foreclosure is absolutley the worst choice of action. Do a short sale instead. Short sale transaction reports can be ameliorated by a competent short sale investor. (I know several of them, too.) The referenced article correctly states that the secret is getting lenders to report a short sale to the credit bureaus as “paid as agreed.”

Bankruptcys almost never solve the problem. They just stall the wolf at the door, Granny got eaten anyway.

Read it here