I have processed mortgage applications for more than three years. That means dealing with FICO credit scores and the racket that that entails. With the advent of the mortgage modification industry, it is inevitable that potential clients will be curious about the effect of a mortgage loan modification on their credit score.
A mortgage modification is defined as an adjustment of the original terms of a mortgage to then be accepted as permanent. That means that whatever the record of payments before the modification then will follow the new terms into the record of the same, new, rewritten loan. If the mortgage holder was current, the record follows into the new loan. However many months late the the homeowner might be will also then follow and adjust as the new payments are made. Modification of a mortgage does not, and cannot raise or lower the score by itself. The bank is obligated to report the new negotiation to the credit bureaus, just as it reported the original transaction.
Pay your mortgage on time for a year and your satisfaction of the agreement will have a positive effect.
This quote from an attorney: “From experience any effects to FICO scores are at the discretion of the Lender/Servicer, generally speaking, if you are current at the time of a completed modification, then that account will be closed and a new one opened under the new terms. From what we understand this has a lateral FICO affect, meaning it’s not supposed to affect a score. The same will happen if the loan is delinquent. The difference is that the loan has already taken the FICO score hit; so that hit rolls for one month and then the new account starts with a fresh, current status.” Translated that means: wait 45 days after the permanent modification, and call Transunion to dispute the negative FICO.
The FICO would increase every month of successful payment.
Now for the kicker. Some lender/servicers are insisting that a loan be delinquent in order to demonstrate “imminent default.’ and then consider modification negotiations. I can hardly wait for the first court suit against a lender for damages incurred to one’s good name and score being damaged because the lender insisted on delinquency. I’m betting on a year; only because the typical homeowner today is so grateful for their modification. To be clear: it is NOT necessary to be delinquent on any payments to apply and qualify for a mortgage modification.
While I hope this essay answers a pertinent question, the effect on consideration of pursuing a mortgage modification assuredly won’t change. The first consideration is the emotional decision to either try to keep one’s home or walk away. That will determine either attempting either a mortgage modification or short sale. The next step should be ascertaining how long the homwowner has to fool around with the negotiations. If the homeowner can afford months and months of haggling, they might attempt either modification or short sale on their own. If expediency and piece of mind are important, contract either a US attorney for modification, or an investor that has experience in successful negotiations with reluctant lenders to purchase the property in a matter of weeks.
The credit bureaus now have a new entry for a mortgage modification. I advise all my customers to call Transunion and dispute their credit report 45 days after their first permanent mortgage modification payment. Transunion will take it from there, believe me.
Click to read more about your Do-it-Yourself Mortgage Modification REST Report
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Give your lender a Mortgage Modification or Short Sale Offer They Can’t Refuse
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Originally posted 2009-08-14 09:35:54. Republished by Blog Post Promoter
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