Many homeowners who tried to do the right thing by saving their home through a loan modification under the Home Affordable Modification Program are being startled by the news that their credit score has fallen by 100 points or so as a result.
What credit counselors say causes this drop is that during the three month trial period lenders mark payments as only partially made. This drops credit because the status is lower than that of someone who continued to make payments as originally agreed upon. Credit counselors and their clients say this is unfair, and certainly creates a surprise result that HAMP applicants never expected when they signed on to the program.
Credit card and credit scoring companies believe the lowered score is fair because filing for a HAMP modification is often the first sign of a credit problem. Credit scores can be built back over time by paying debts fully and on time.
Of course, having a credit reduction of 100 points—something that can definitely hurt when applying for further credit, a job or even insurance—is not as bad as going through foreclosure which on average lowers a credit score by 150 points.
This unanticipated result of the HAMP program is likely to have a political impact for the Obama Administration. HAMP participants feel that they should have at least been warned that a lowered credit score would be the likely result of getting involved with the program, and that warning was never issued until it was too late to help many participants.
DaveRosenmarkle
Broker/Owner
Highland Realty
703-538-2566
davidrose@mris.com
www.HighlandAgents.com
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