Loan Modification and my credit score under the Making Home Affordable Plan

Last month I made my first payment on my modified mtg through the Making Homes Affordable plan. I was approved in August and was told NOT to make my regular August payment because it will mess up the numbers they submitted for the loan. So I didn't. Up until July I had never been 30 days late on my mtg. I submitted my payment for July on the 31st and the bank posted a 30 days past due on my credit report which made my score plummet from about 672 to 615. The lady I am dealing with on the modification says that Flagstar will keep sending me past due letters, but will not report it to my credit. So far this is true (The July late payment was still my regular payments), but the timing could not be worse for me. My July payment was my first payment that I have ever had over 30 days and now my credit report is frozen at this horribly low score for 3 months through my tr

We have applied with Wells Fargo for a loan modification under the 'Making Homes Affordable' program. It has been over 2 months and we were told we qualified and were expecting to begin our 3 month trial period this month.
However, the lender has decided our monthly deficit is too great and have approved us for a 3 month 'Moratorium' situation instead. During this period, we will not pay our mortgage at all, and will be reported to the credit bureau under a 'reduced payment plan'. They could not tell us definitively whether or not this would/ will impact our credit scores. Has anyone else heard about this?
And, is the bank just looking for a means to prolong the final modification? Should we just continue to pay our regular payment until we can show our deficit is lower and essentially start the process all over again. Which we can't really do, but are very concerned about the impact on our credit and can't seem to get a straight answer anywhere.
I had read somewhere that the program ended in June of 2010- is that tru

We have applied with Wells Fargo for a loan modification under the 'Making Homes Affordable' program. It has been over 2 months and we were told we qualified and were expecting to begin our 3 month trial period this month.
However, the lender has decided our monthly deficit is too great and have approved us for a 3 month 'Moratorium' situation instead. During this period, we will not pay our mortgage at all, and will be reported to the credit bureau under a 'reduced payment plan'. They could not tell us definitively whether or not this would/ will impact our credit scores. Has anyone else heard about this?
And, is the bank just looking for a means to prolong the final modification? Should we just continue to pay our regular payment until we can show our deficit is lower and essentially start the process all over again. Which we can't really do, but are very concerned about the impact on our credit and can't seem to get a straight answer anywhere.
I had read somewhere that the program ended in June of 2010- is that true?

This message was edited 1 time. Last update was at 12/02/2009

You'll see a number of posts on this forum that describe the partial payment notations associated with loan modifications. It will hurt your credit scores and quite severely. But it sounds like you are in a precarious situation, and perhaps your credit scores should not your primary concern. You can always rebuild your credit.

The real question is whether you can afford the home with the loan modification. If you cannot, then it's important to look at whether there are other ways to save your home. For example, you may want to consult a bankruptcy attorney about Chapter 13 bankruptcy. Or perhaps you need to think through what you'll do if you can't keep the home.

I am truly sorry you are going through this and hope things get better for you soon.

Wow -- shouldn't be surprising that the government is beginning to get equally as frustrated with these lenders who are not fulfilling their part of accomplishing the modifications under the Making Home Affordable program. These entities received huge bailouts and all the while continue to be less then proactive in getting this program running. They are receiving huge incentives to modify current homeowners and yet still drag their feet.

We are with Bank Of America (transferred from Countrywide) and contacted our lender on 10/26/2009 to ask for the modification for those not in default. We were "pre" qualified over the phone and told to check back in 15 days. Called several times and could not get through to anyone except a never ending phone system that kept trying to get a payment set up. Contacted them today to find out how much longer before we receive anything in the mail, they stated that they are way behind and hopefully soon. Ive been making our regular payments, as we have not received anything in writing confirming the proposed modified loan amount and thereby I would have nothing to go by sustaining my option to that payment. Ive bee advised that we are 2 payments into the trial period at this point , although Ive made full payments. I was also advised by BOA that upon conclusion of the modified trial period, they will do a full file update to our credit report? So I think in the meantime, they report it as current, on a modified payment and after it reflects almost like a refinance? These are my concerns...
1) How will this effect our credit score (740s)
2) Will this effect our relationship with our credit card companies?
3) Homeowners who are current should not be negatively impacted when doing this as it positively impacts your financial stability to modify? and that of the banks through incentives and payments to participate. A homeowner is more likely to work hard to maintain when they are put in a better position to equally benefit from working with the bank.

Bmmay -

Personally I agree with you completely. Unfortunately, our research has uncovered an inconsistent approach to how these loan modifications are reported to the credit reporting agencies. Some homeowners have told us they are being reported as a partial payment, either during the trial period or after. This has a serious negative effect on their credit scores.

It reminds us of the way credit counseling was reported way back when, and given the fact that credit counseling is no longer a factor considered by FICO when it calculates credit scores, it seems very possible that these loans could receive the same treatment.

The feedback I've received when looking into this is that homeowner's credit scores are not high on the list of priorities. That means you, and other homeowners who are trying to get relief through modifications, need to speak up. Write your representatives in Washington and tell them how difficult this process has been, and how you believe it's unfair that it should damage your credit.

I'd also recommend that you use our free Credit Report Card to see how your credit has been affected thus far.

As far as your other lenders are concerned, if a negative item hits your credit report they may take adverse action, such as lowering your credit lines or raising your rates. If you receive these notices, keep copies for your files as a record of the credit damage you've suffered, and again, speak up.

I can't imaging how stressful this must be for you, and I hate to give you more work to do, but I do think it's the only way we are going to see some positive changes come out of this mess.

Please let us know of new developments and hang in there.

Thank you for your reply. I knew this wasn't going to be easy, and I know we should be more concerned with our finances then our credit scores, however, we have worked really hard to stay current on everything up to this point. My husband has bee laid off since April and we have had NO luck in finding employment in his field whatsoever. We just can't keep up at this point with everything. Im trying to consider everything ahead of time, in that, if our credit was negatively impacted and our current cards went up in payment, then I would be forced to default on those, and probably be well on our way to a bankruptcy if that happens. UGGHHh, even typing the word makes me sick. We aren't purposely doing this, it has happend to us. Whats even more disturbing, is that, I know of many many homeowners whom were in default status with BOA and they bent over backwards to modify theirs immeidately. Received their paperwork within 3 days of calling, and they had HUGE equity in their properties and were nearly 12 months behind in payments, not to mention they received assistance the year before with payments from some fannie mae program.

Its just not fare that this program to assist those who are current, in the hopes of preventing further decline in the market via avoiding forelcosures, yet they don't seem to have the internal structures to facilitate these programs. They first BOA rep that I spoke to told me the new "qualified" payment, however, we never receieved any paperwork. Then the 2nd person I spoke to on Tuesday, told me I couldve been making that payment? Without anything in writing? That is where I think people are getting the issues on their credit, that partial payment is not updated in the system to show as a payment option, so anything less then the statements would incur a partial payment reporting?

In many forums Ive been reading, people are adivsing that we contact our representatives and the Office of Controller Currency or something? Im looking into that today to ensure our options. I recently also saw a news story that a few banks were looking to hire agents to go out to homeowners and assist them with their modification paperwork. This is something I would love to do to help. I have been a Sr processor in the past, and would love to help others understand. Also, I read that there is a reporter whom is working on a story detailing alot of homeowners struggles in dealing with the banks on modifications. Its time to expose their poor business practices for what they are..... THEFT and GREED!

I will keep this post updated as to my dealings , so that you can understand how the process is going.

This message was edited 4 times. Last update was at 12/04/2009

Starting in September, there's a new guideline for how lenders can report a loan modification to credit bureaus. They can classify it as a "partial payment" of your mortgage. And that can be a big negative mark on your credit report.

Depending upon what else is in your credit history, this partial payment status "can lower somebody's FICO score by over 50 points," said Craig Watts, spokesman for FICO, formerly known as Fair Isaac Corp. and the developer of the most widely used credit score.

The "partial payment" status can stay on your credit report for seven years, says John Ulzheimer, president of educational services at Credit.com. "You have to make a decision, because modifying your loan is going to hit your credit," he said. FICO scores are the most widely used credit scores. Lenders do use a variety of other credit scores and each one may react differently to a loan modification.

Why should you care about a dent in your credit score? People with mortgage trouble have big financial problems, certainly, and a low credit score's probably not at the top of their list of concerns.

But a lower credit score really stings. People with high credit scores get the best interest rates and deals from lenders.

Low scores, these days, are resulting in lines of credit being lowered or cancelled, credit cards limits reduced and landlords demanding heftier up-front payments from renters. They can also result in higher rates on new loans and credit cards.

"If they continue to do this, a lot of consumers are going to pay substantially more for future credit
you can read more at

Hi roggertoro - Actually, new guidelines for FICO began on November 1st that changes the negative hit to consumers going under a loan mod under the government plan. One of our experts wrote about this topic early last month. Here's an excerpt from our news section:

"November 1st, 2009, brought with it good news for consumers who want to modify their mortgages without lowering their credit scores. That was the first day that a new way of reporting a loan modification to the credit bureaus became available to mortgage lenders. From this point forward, mortgage lenders can report a loan modification as "Loan Modified Under Federal Government Plan." This new way to report a loan modification does not have any negative impact to a consumer's FICO credit scores.

Keep in mind, however, that this new credit reporting guideline only applies if the consumer seeks a loan modification under the Making Home Affordable plan. If you choose a loan modification program that is not a government plan, you run that chance of ending up with lower credit scores because of the very damaging "partial payment plan" reporting guidelines. A partial payment plan statement on your credit report is considered seriously negative and can do significant damage to your credit."

To read the entire article, go to: Loan Modification Reporting Changes

bmmay - My heart goes out to you and your husband. Hang in there and please do let us know what happens along the way.

Thank you everyone for your input and advise. It is certainly helpful and I am ever thankful for that. I will continue to advise you as to the status of this with BOA. What is bothering me further is:

1. We just recently were requried to login under BOA site. Under the old Countrywide site, there was all types of informational material on there to advise of hardship issues and contacts. BOA does not have anything. They have a small link that says "work out information", however, when I click that, it states that we have nothing worked out, though I called in October AND they're advisors are telling me I can make my modified payment? How is that , if nothing is worked out yet?

2. BOA has called a few others that I know to offer the loan mod program, and they are not late and have no reason to show imminent default. That is a key think in the new refinance through Making Home Affordable Modification - you must be able to show imminent default.

I also advise homeowners to check out the site : financialstability.gov (receommended by a HUD approved housing counselor). Im continuing to work on this modification, paid our Nov payment on the 30th, now at risk of utilities being disconnected... wish us luck

bmmay - Did you see this page?

http://homeloans.bankofamerica.com/homeloanhelp/

Thanks for keeping us posted and please continue to share your experience with your Bank of America mortgage loan modification. There are many others in the same boat as you. Hopefully you can help each other - and we'll let you know if we see new information you should know.

Thank you - yes I have been to that page before.

Update = Ive called and spoken to 3 different team members at home retention " imminet default department". Each time I get different answers to questions, which is why so many homeowners are frustrated with the system, and fail to finalize. Here is the update ..

1. Was told at initital call on 10/26/2009 that we prequalified - quoted new payment at 31% - told we would receive paperwork in the mail and to check back in 12 days. NEVER received paperwork, called, no status yet, pending approval from investor (freddie mac), told that freddie mac takes longer then fannie mae does.

2. Called 11/30/2009 - told the process takes 45 days and that we were 2 payments into the modified 3 payment trial period. I told her I wasnt comfortable making a modified payment without a written notice stating the verbal offer to do so. If I paid less then my statement, then I could be considered late. She told me she couldnt advise as to that, that I should pay what I was comfortable with.

3. Called 12/8/2009 - asked to leave a msg for call back within 48 hours due to high call volume. No call back received.

4. Called 12/10/2009 - told it is still pending - docs have not been done - waiting investor approval-45 days ( today is 45 days). She also said that I should have started making the "modified" payment in October, though I was never told as such and had no written verification to go by. She further stated that since I had not began making the modified payment from the date I called in, that I must now continue to make full payment until the docs are received and then I will start the new payment probably at the 1st of the year? They could not tell me when or how freddie mac notifies them of the approvals?

At this rate, they are pushing homeowners into a default status. This program was expanded to assist homeowners who are current on payments , but at risk of defaulting without intervention. If I started in October calling and needed help, then it should move along quickly to avoid the inability to make the payment, in such case, could disqualify you for the program, as the program states that you must be current at the point of entering the the modficaiton, and make the trial payments on time. Im not able to make the full payment for December, but could definitely do the modified payment. However, if I go behind in my payment , they could decline the modifiaiton? This is how its going -- I can't understand it -- they should have a system in place to timely process and produce. I could deal with the 30-45 days, but at this point, Im not sure that is happening.

Ive contacted the Hope Now program and spoke with a housing counselor there, who confirmed the process of 45 days, and advised that I escalte and contact my investor Freddie Mac, which I did through email (only option I could find). We shall see if they get this done after my complaining. If we dont find out something within the next week, I am considering filing complaints with the FTC and the Office of Currency Controller that governs the banks.

Thanks for all your input and thoughts and links to helpful data -- it helps me to think things through thoroughly. Ill keep you posted.

This message was edited 1 time. Last update was at 12/15/2009

bmmay -

Thanks for the update. I'd say it's unbelievable, but unfortunately you're not the only one complaining about the same thing.

One more thing I would suggest you try: Call your Senators and/or Representative's office in Washington and ask for someone there who can help you. Many years ago I worked in a Senator's office and my sole job was to help constituents break through red tape. It was amazing how much more quickly companies would respond when the Senator's office was calling!

And at a minimum, your elected officials need to know how these programs are really working.

Gerri

We just completed our Making Home Afordable program and starting Feb 1st we will have new payment and new low rate. It was very stresful process, took us a little over 4 months, hundreds phone calls but it was worth it!!!!! If anybody still is interested in this subject I can tell you our story but the bottom line is that we went from 7.75% to 5.125% and payment of $2330 to 1840. One thing I can say is that I have bigger knowledge that any info rep at Wells Fargo