This outcome hasn't been discussed much before but now it's out there for everyone to see. Namely that if a homeowner in distress is successful in using the Home Affordable Modification Program, kicked off in March, to lower his mortgage payments, his FICO score is likely to take a hit. FICO is the commonly-used barometer to assess a consumer's credit standing.

That's because many mortgage lenders report the modification to FICO as such. This means that the original terms of the loan were changed, often for less than the full amount, and any time that happens FICO's existing formula regards that as a negative. The score can drop 100 points and more. A perilous dive.

Under current train of thought, the negative impact is entirely reasonable. By how many points it should impact the score is debatable, however. In this deep recession borrowers that are proactive and seek to work things out before falling behind in their payments ought not to pay a heavy price for it. They are trying to achieve a win-win outcome for everyone. It clearly seems excessive to see FICOs tumble 100 or more points.

Not only that, but consumers that have done this have also generally been unaware of the blow to their credit scores. They only find out about it later when requesting a fresh report. Either the disclosure hasn't been there at all, or was buried somewhere in fine print, the usual industry practice. This can predictably slow down foreclosure prevention efforts to the detriment of the entire economy. That, for the most part due to FICO using an outdated scoring model. It should be quickly revisited to reflect the presently difficult real estate market.