Mortgage modification may not impact credit score -- for now on clarkhoward.com

Over the last year, Clark has had more than two dozen people call in who either had done or were contemplating doing a loan modification to deal with a burdensome mortgage.

A common question arose: What does a loan modification do to your credit score and credit report? Until now, the consumer champ didn't have a good answer.

Syndicated financial writer Kathleen Pender now reports that FICO has adopted new guidelines to deal specifically with a loan modified under a federal government plan. The good news is that there will be no immediate change to your credit score.

However, FICO will revisit this question down the road. They need a year's worth of data about your behavior paying other debts after a loan modification in order to make a final determination on how it will impact your score.

It just goes to show that the whole loan modification deal is still a moving target that's evolving everyday.

Meanwhile, the attorney general of Florida is upset with Bank of America for the bank's alleged incompetence in handling mortgage modifications. Those who got BOA's approval for a mod are being mistakenly put into foreclosure or reported as delinquent to credit bureaus!

The Miami Herald reports those kind of shenanigans have prompted 452 complaints about BOA to the attorney general's office. By comparison, JP Morgan Chase only merited 69 complaints and Wells Fargo only 51.

Be sure to complain to your state attorney general if you're having a similar problem with your lender.

What others are saying

Modificatiion Mishandling
Last January and February, after hearing on the news over and over to contact your lender if you feel you may have a problem down the road with your mortgage, I did. I have been unemployed since July 2008 and wasn't sure how long unemployment compensation would continue. Even though I was paying the full amount on time, I called National City Mortgage/PNC to see what options were available. They thanked me for being proactive (stupid) and sent a package to fill out and return. Their first package said my credit would be hurt so I refused it. Their second package was much different and I accepted to pay 3 trial payments and sent them to a different location.

I heard nothing for 3 months when I received a letter saying my modification had failed because of "Failed Underwriting Waterfall". I believed that was for the next 3 months or more. No one ever let me know that full payment was expected during that trial payment period even though I had coupons to send with my reduced payment. As I understand it now, it's illegal to get a Forebearance in the State of Ohio if you're receiving unemployment? After the 3 months they said I was 2 months in arrears because of how they handled the lower payments. What's worse is that they seriously hit my credit score and began foreclosure proceedings due to being 60 days late! What's worse is that THEY claimed I was in breach of contract but they never honored their OWN contract for the trial payments. This came after I had already paid the next month's mortgage payment in full.

By that time I was sure that I had been scammed by someone outside National City/PNC. I was appalled to find out that it was the mortgage company that scammed me. It's going to take quite an effort to get my credit fixed.

Thank you all for sharing these unfortunate experiences but others really need to know some of the dangers.
By Connie @ 01/24/10 05:02:17 PMreport abuse
HAMP modification and credit suppression?
i everyone,
Thanks for your help. Here's the situation:

In March 2009, I asked GMAC Mortgage about a loan modification. I was not delinquent on payments, just concerned about my future financial situation given recent layoffs and paycuts and not eligible for refinancing from an ARM since I was underwater in my condo (owed $260, valued at $190). After much back and forth, in July 2009 I was approved for HAMP modification with the Modification Workout period beginning 8/27/09. I was not delinquent on any payments prior to 8/27. I successfully completed all trial payments in August, September, and October. I was approved for permanent modification on 12/22/09, with a final payment due 1/31 and the new mortgage modification effective 2/21/09.

In late November, my financial situation became much better (recently was married). Also, I became suspicious about this entire process because I was receiving notices of payments past due and potential acceleration to foreclosure. When I called GMAC mortgage, the loan modification representatives told me to ignore these letters. Then, I did some research and realized that loan modification could really hurt credit scores. I have had a credit score around 750, and was concerned about that. I received a variety of contradictory responses from GMAC. I also discovered in November that GMAC began SUPPRESSING ANY CREDIT REPORTING since MAY 2009.

Recently I decided to get current on all payments of my original loan and not accept the modification. I can afford my original loan, and just want to wring my hands of this entire situation because I am not the individual that the HAMP modification is for. I can afford this, and feel it is the right thing to do.

So, thanks for reading and here are my questions:

1) Why would a lender suppress reporting to credit bureaus? Is this a good or bad thing?
2) As of right now, I am current and I am not delinquent. Could GMAC "unsuppress" reporting and actually go back and share derogatory reporting retroactively for the months where I made successful trial payments, but was technically delinquent because they were less than my original loan?
3) What is the specific policy about credit reporting during the HAMP process?

I appreciate any and all help.

Allan in Minnesota
By Allan @ 01/16/10 07:58:37 AMreport abuse
Morgtage Modification - FICO Score
Morgage modifications absolutely affect your FICO score! During the trial period of our MHA Mortgage Modification, our servicer reported our situation precisely as required by the program. This showed on our Equifax report as the total mortgage amount in the "past due" amount as well as the horrific derogatory statemment that our loan was being modified. All of our open lines of credit have been slashed to the amount we owe, now using 90%+ of our availabel credit and our interested rates have been jacked up beyond recognition! This has dropped our score over 100 pts. Terrible, terrible situation!
By Staci @ 01/07/10 02:56:22 PMreport abuse
Loan Modification
EMC Mortgage company offered me a loan modification last January 2009. Two months later they told me to start all over for the new Obama plan. In August 2009 they sent me the final modification only dropping my payment by $60 and the loan modification is more than my 31% of my gross income. I told Emc this and they told me I had to start all over again. I tried calling the supervisor and have left many messages for her to call me back. No calls back at this point. When I bought my house it was a month before the market crashed, I bought it for $134,700 and the last house in my nieghborhood sold for $100,00 months ago. Under the current loan Modification I would owe $140,000 eventhough I paid for over three years and missed 4 payments. This whole thing stinks! I am one of the few Americans who still has a job! Any answers out there for me? What if my wages are being garnished now for a bad credit card(does this lower my gross income?) The reason why I have a bad credit card is becuasethe IRS came to my house one year after I bought it and said I owed $15,000 for a missed payment of 1,200 to them nine years previous on a buisness I owned. I had a paper saying I paid the IRS in full in 2003 but they said it did not matter. They garnished my wages for 3 months before they deemed it as uncollectable which through me behind on that credit card. The IRS also put a lean on this house for 12,000. They also keep all tax returns and stimulis money. If any one has any answers for me that would be great! I Have a 10 month old son and a wife that I am trying to keep the roof over thier head.
By Andrew @ 12/19/09 01:05:23 PMreport abuse
Credit score abuse
I am currently completing a mortgage mod. with Chase. I have always had a credit score between 750 and 800. Prior to iniating the process I questioned them about the effect on my credit score. I was told little or none. I have never been delinquent with a payment. after starting the process, I was told not to make any payments until my situation was evaulated, I did not for approx 60 days. My new temp payment was determined and I began making the adjusted amount. Now my credit info says my score is down atleast 100 points and they have reported me delinquent 4 time for atleast 90 days. Now I have an uphill battle to correct this unfortunate circunstance. Be carefull, the lenders dont like having to do these mods even though we bailed them out and this is how they show it.
By Calvin L. @ 12/10/09 07:39:57 AMreport abuse
Loan Modifucation
I was just on the phone with BOA, & I agree with the former person's complaint. I had spent 3 hrs, being transferred, and being cut-off. The final answer was they couldn't help me. I have been trying to obtain a loan modification. I foolishly invested in 2 homes and also have a permanent residence. I am having great difficulty in paying mortgages, etc. Can you help in any way?
By Teri Remblake @ 11/23/09 08:58:27 PMreport abuse
Mortgage Modification
After losing my job in February we did a mortgage mod and were told by Wells Fargo that it would not effect my credit score or be reported as late payments b/c they were in fact on our side - so we thought. I am in the proces of starting a small business but can't get funding due to the bad credit report.My score has always been between 750-800. Before doing a modification make sure you think it through with every scenario because now, we are playing catch up.
By John B. @ 11/11/09 02:49:00 PMreport abuse
Credit score during a Modification
Wells Fargo approved me for the modification and continues to send me forclosure letters and report me late to credit bureaus.
By Chelle @ 11/10/09 06:55:22 PMreport abuse
Being on the Making Home Affordable trial payment plan does affect your credit, because it is still technically a forbearance until the loan is permanently modified.

That being said, there are more important things than your credit when it comes to saving your home.
By Chelse @ 11/09/09 09:01:49 PMreport abuse
Does Not Apply To Modifications!
While it's great that this will help those who choose to go this route as of today, it will not help those who went this route, most likely, unless the bank makes a special consideration, which is really stinky. Also, just to add, we are a BoA customer. They do stink and deserve all of the complaints. We did a modification almost a year ago. Our paperwork just went through a month or so ago. They failed to tell us what our payment included and now our payment is $300.00 more than we expected. So, for 8 months we *thought our payment was one thing and we are once again behind because they say we didn't pay enough. Hello? How are we supposed to know to pay more when you failed to let us in that little secret??? If you say pay x amount, that's what you pay! Idiots. They also floated our money for 6 months and never applied it to our account. Very unprofessional. We had Countrywide before they went bankrupt. BoA took over. I would run if I could. They are clueless and none of the departments talk to each other. You sit on hold forever just to be transferred approximately three times on average. It's completely unacceptable but what can you do? We are between a rock and a hard place. And by the way, I made over 6 figures before having to take a 40% paycut without a prospect of another job. We supplemented with savings for over a year before realizing that my income was not going to get better. My wife went back to work and we are still struggling. We didn't fall into a mortgage scheme or live beyond our means and our credit scores were on average of 750. Not perfect but not bad. Life happened and we are fortunate that we could keep our home and that I have a job. We are very well aware that others are not so lucky.
By Rob G. @ 11/09/09 06:48:56 PMreport abuse

Modificatiion Mishandling

Last January and February, after hearing on the news over and over to contact your lender if you feel you may have a problem down the road with your mortgage, I did. I have been unemployed since July 2008 and wasn't sure how long unemployment compensation would continue. Even though I was paying the full amount on time, I called National City Mortgage/PNC to see what options were available. They thanked me for being proactive (stupid) and sent a package to fill out and return. Their first package said my credit would be hurt so I refused it. Their second package was much different and I accepted to pay 3 trial payments and sent them to a different location.

I heard nothing for 3 months when I received a letter saying my modification had failed because of "Failed Underwriting Waterfall". I believed that was for the next 3 months or more. No one ever let me know that full payment was expected during that trial payment period even though I had coupons to send with my reduced payment. As I understand it now, it's illegal to get a Forebearance in the State of Ohio if you're receiving unemployment? After the 3 months they said I was 2 months in arrears because of how they handled the lower payments. What's worse is that they seriously hit my credit score and began foreclosure proceedings due to being 60 days late! What's worse is that THEY claimed I was in breach of contract but they never honored their OWN contract for the trial payments. This came after I had already paid the next month's mortgage payment in full.

By that time I was sure that I had been scammed by someone outside National City/PNC. I was appalled to find out that it was the mortgage company that scammed me. It's going to take quite an effort to get my credit fixed.

Thank you all for sharing these unfortunate experiences but others really need to know some of the dangers.

By Connie @ 01/24/10 05:02:17 PMreport abuse

HAMP modification and credit suppression?

i everyone,
Thanks for your help. Here's the situation:

In March 2009, I asked GMAC Mortgage about a loan modification. I was not delinquent on payments, just concerned about my future financial situation given recent layoffs and paycuts and not eligible for refinancing from an ARM since I was underwater in my condo (owed $260, valued at $190). After much back and forth, in July 2009 I was approved for HAMP modification with the Modification Workout period beginning 8/27/09. I was not delinquent on any payments prior to 8/27. I successfully completed all trial payments in August, September, and October. I was approved for permanent modification on 12/22/09, with a final payment due 1/31 and the new mortgage modification effective 2/21/09.

In late November, my financial situation became much better (recently was married). Also, I became suspicious about this entire process because I was receiving notices of payments past due and potential acceleration to foreclosure. When I called GMAC mortgage, the loan modification representatives told me to ignore these letters. Then, I did some research and realized that loan modification could really hurt credit scores. I have had a credit score around 750, and was concerned about that. I received a variety of contradictory responses from GMAC. I also discovered in November that GMAC began SUPPRESSING ANY CREDIT REPORTING since MAY 2009.

Recently I decided to get current on all payments of my original loan and not accept the modification. I can afford my original loan, and just want to wring my hands of this entire situation because I am not the individual that the HAMP modification is for. I can afford this, and feel it is the right thing to do.

So, thanks for reading and here are my questions:

1) Why would a lender suppress reporting to credit bureaus? Is this a good or bad thing?
2) As of right now, I am current and I am not delinquent. Could GMAC "unsuppress" reporting and actually go back and share derogatory reporting retroactively for the months where I made successful trial payments, but was technically delinquent because they were less than my original loan?
3) What is the specific policy about credit reporting during the HAMP process?

I appreciate any and all help.

Allan in Minnesota

By Allan @ 01/16/10 07:58:37 AMreport abuse

Morgtage Modification - FICO Score

Morgage modifications absolutely affect your FICO score! During the trial period of our MHA Mortgage Modification, our servicer reported our situation precisely as required by the program. This showed on our Equifax report as the total mortgage amount in the "past due" amount as well as the horrific derogatory statemment that our loan was being modified. All of our open lines of credit have been slashed to the amount we owe, now using 90%+ of our availabel credit and our interested rates have been jacked up beyond recognition! This has dropped our score over 100 pts. Terrible, terrible situation!

By Staci @ 01/07/10 02:56:22 PMreport abuse

Loan Modification

EMC Mortgage company offered me a loan modification last January 2009. Two months later they told me to start all over for the new Obama plan. In August 2009 they sent me the final modification only dropping my payment by $60 and the loan modification is more than my 31% of my gross income. I told Emc this and they told me I had to start all over again. I tried calling the supervisor and have left many messages for her to call me back. No calls back at this point. When I bought my house it was a month before the market crashed, I bought it for $134,700 and the last house in my nieghborhood sold for $100,00 months ago. Under the current loan Modification I would owe $140,000 eventhough I paid for over three years and missed 4 payments. This whole thing stinks! I am one of the few Americans who still has a job! Any answers out there for me? What if my wages are being garnished now for a bad credit card(does this lower my gross income?) The reason why I have a bad credit card is becuasethe IRS came to my house one year after I bought it and said I owed $15,000 for a missed payment of 1,200 to them nine years previous on a buisness I owned. I had a paper saying I paid the IRS in full in 2003 but they said it did not matter. They garnished my wages for 3 months before they deemed it as uncollectable which through me behind on that credit card. The IRS also put a lean on this house for 12,000. They also keep all tax returns and stimulis money. If any one has any answers for me that would be great! I Have a 10 month old son and a wife that I am trying to keep the roof over thier head.

By Andrew @ 12/19/09 01:05:23 PMreport abuse

Credit score abuse

I am currently completing a mortgage mod. with Chase. I have always had a credit score between 750 and 800. Prior to iniating the process I questioned them about the effect on my credit score. I was told little or none. I have never been delinquent with a payment. after starting the process, I was told not to make any payments until my situation was evaulated, I did not for approx 60 days. My new temp payment was determined and I began making the adjusted amount. Now my credit info says my score is down atleast 100 points and they have reported me delinquent 4 time for atleast 90 days. Now I have an uphill battle to correct this unfortunate circunstance. Be carefull, the lenders dont like having to do these mods even though we bailed them out and this is how they show it.

By Calvin L. @ 12/10/09 07:39:57 AMreport abuse

Loan Modifucation

I was just on the phone with BOA, & I agree with the former person's complaint. I had spent 3 hrs, being transferred, and being cut-off. The final answer was they couldn't help me. I have been trying to obtain a loan modification. I foolishly invested in 2 homes and also have a permanent residence. I am having great difficulty in paying mortgages, etc. Can you help in any way?

By Teri Remblake @ 11/23/09 08:58:27 PMreport abuse

Mortgage Modification

After losing my job in February we did a mortgage mod and were told by Wells Fargo that it would not effect my credit score or be reported as late payments b/c they were in fact on our side - so we thought. I am in the proces of starting a small business but can't get funding due to the bad credit report.My score has always been between 750-800. Before doing a modification make sure you think it through with every scenario because now, we are playing catch up.

By John B. @ 11/11/09 02:49:00 PMreport abuse

Credit score during a Modification

Wells Fargo approved me for the modification and continues to send me forclosure letters and report me late to credit bureaus.

By Chelle @ 11/10/09 06:55:22 PMreport abuse

Being on the Making Home Affordable trial payment plan does affect your credit, because it is still technically a forbearance until the loan is permanently modified.

That being said, there are more important things than your credit when it comes to saving your home.

By Chelse @ 11/09/09 09:01:49 PMreport abuse

Does Not Apply To Modifications!

While it's great that this will help those who choose to go this route as of today, it will not help those who went this route, most likely, unless the bank makes a special consideration, which is really stinky. Also, just to add, we are a BoA customer. They do stink and deserve all of the complaints. We did a modification almost a year ago. Our paperwork just went through a month or so ago. They failed to tell us what our payment included and now our payment is $300.00 more than we expected. So, for 8 months we *thought our payment was one thing and we are once again behind because they say we didn't pay enough. Hello? How are we supposed to know to pay more when you failed to let us in that little secret??? If you say pay x amount, that's what you pay! Idiots. They also floated our money for 6 months and never applied it to our account. Very unprofessional. We had Countrywide before they went bankrupt. BoA took over. I would run if I could. They are clueless and none of the departments talk to each other. You sit on hold forever just to be transferred approximately three times on average. It's completely unacceptable but what can you do? We are between a rock and a hard place. And by the way, I made over 6 figures before having to take a 40% paycut without a prospect of another job. We supplemented with savings for over a year before realizing that my income was not going to get better. My wife went back to work and we are still struggling. We didn't fall into a mortgage scheme or live beyond our means and our credit scores were on average of 750. Not perfect but not bad. Life happened and we are fortunate that we could keep our home and that I have a job. We are very well aware that others are not so lucky.

By Rob G. @ 11/09/09 06:48:56 PMreport abuse

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Nov 09, 2009 -- Mortgage modification may not impact credit score -- for now

What others are saying