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Article Directory :: Finance & Investment Articles
A loan modification is a renegotiation of the terms of your home mortgage loan to lower your monthly mortgage payment. You may be able to get the best fixed rate mortgage available, get a principal reduction or some other option that allows you to keep your home rather than lose it in foreclosure. President Obama even made loan modifications the focal point of his plan to help end the real estate crisis in America. The Obama federal loan modification program was called HAMP (Home Affordable Modification Program); however, many homeowners are finding out that their credit scores are being adversely affected in ways they were not aware of.
For example, borrowers who are currently taking part in the federal loan modification plan are realizing that they could be receiving black marks on their credit scores. Some people with good credit who have made their payments on time are being hit with lower credit scores because the payments under the program are only being coded as "half payments." As a result, some are seeing their credit scores fall by 30 points to 100 points. While this obviously does not affect their mortgage (since they have already renegotiated the terms) it could very well affect other borrowing, such as credit card interest rates, car loan interest rates and more.
However, part of the reality is that a loan modification is sort of a trade off. You may be able to save your home, but in return you will have to sacrifice your credit score for a period of time. If you hire a loan modification company, they may be able to get you the best fixed rate mortgage available, but your credit score could very well dip for a few years. This must also be balanced with the affects of not getting a loan modification. For example, if you simply allow your home to fall into foreclosure, or if you declare bankruptcy, these could lower your credit score for up to ten years! Plus, the current economy is creating challenges for people with credit scores of 720; imagine what it would do to someone with a recent bankruptcy on their record.
This may be a time to pressure Congress to pass laws that amend how FICO scores are tallied and how mortgage companies report financial information to the three major credit agencies - Equifax, Experian and Transunion. However, until that situation gets worked out, homeowners will have to reconcile the fact that their loan modification could put a black mark on their credit scores for a while. Some assistance could come from a loan modification company; however it is ultimately up to the banks and mortgage service companies to determine the future of how credit scores are impacted.
J Chase is a loan modification professional. He is affiliated with a national organization that has helped 1000s of homeowners save their properties while reducing their rate and mortgage payment. He has extensive knowledge of the internal & governmental modification programs available for homeowners. For information on finding the best loan modification company visit http://www.ezloanmodifiers.com
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