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Just in from CNNMoney; Trial Loan Modifications DO Hurt Borrowers’ Credit

Only weeks ago, I published a post with updated information from an advanced education class I was taking though the CRS (Certified Residential Specialist) program for Realtors, that was discussing different types of distressed sales and loan modifications to your mortgage, and how they would impact your credit score. In that class, we learned that borrowers were being told that taking advantage of the government HAMP (Making Home Affordable) program should not negatively effect their credit score, and that we should encourage borrowers to strongly consider this option before looking down the road of a short sale or foreclosure. Today, CNNMoney exposes several stories from people who have utilized the program, and whose credit scores are mysteriously dropping.

For some, a drop would be completely expected. For those who are behind on mortgage payments and who take the new mortgage arrangement, it is reasonable to expect that their credit would have already been damaged to some extent, just from the mortgage payments that had been missed. However, many other people have been encouraged to look at the HAMP program to re-arrange their mortgage and reduce their payments, even before they are behind on a payment. It is these people who have been squeaking by, trying to make ends meet and who have been making payments, who were being told (even by mortgage officers themselves) that their credit would not be effected. One of those stories is followed in the article today;

Axelrod, a municipal employee who lives outside Chicago, entered a trial mortgage modification program this spring.

He had not fallen behind in his mortgage, but he was finding it harder to make ends meet after his overtime was cut and his property taxes skyrocketed. Told it would not hurt his coveted 750 score, Axelrod secured a $565 reduction in his monthly payments.

Eight months later, Axelrod is still stuck in the trial modification, trying to satisfy his loan servicer’s endless requests for documents.

And to his horror, his credit score has plummeted to 644.

“It’s completely destroyed my credit,” said Axelrod. “If I had known it would affect my score, I would have never entered the program.”

Representatives at JPMorgan Chase (JPM, Fortune 500), which services Axelrod’s loan, are instructed to tell applicants that entering a modification could impact their credit histories, a bank spokeswoman said.

Despite his weakened credit score, there is at least some good news for Axelrod: After being contacted by CNNMoney.com, JPMorgan Chase said his permanent modification had been approved.

[From Trial loan modifications hurt borrowers’ credit histories – Dec. 28, 2009]

According to CNNMoney;

The coding alone can impact credit scores, which measure a consumer’s financial health and range from 300 to 850 under the FICO system. The severity depends on how many payments the borrower missed before entering the program. Those who were current in their mortgages could see their scores fall up to 100 points, according to the Treasury Department.

[From Trial loan modifications hurt borrowers’ credit histories – Dec. 28, 2009]

For now, it sounds as though a mortgage modification may still certainly have its benefits over a short sale or a foreclosure, if you want to keep your home. However, it is important for everyone to know that for what we can tell, it does not come as “risk-free” as it may have been advertised. This is sure to be a topic we’ll be hearing about more soon, but until then, please be sure to consult your tax advisor and your attorney for advice before beginning a mortgage modification program.

[Hat tip to Lani Rosales at Agent Genius for pointing out this important article.]


Posted on December 29, 2009 Leave a Comment

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    JUST LISTED & FEATURED LISTING | FIVE HOMES ๐ŸŽˆ

๐Ÿ  1072 Delphi Lane, Charlottesville, VA 22911 | MLS#642401 | $650,000 | ๐Ÿ›๏ธ 4 bed ๐Ÿ› 3.5 bath | ๐ŸŽ‰ OPEN HOUSE Sunday, June 11th from 2 PM - 4 PM, hosted by Brentney!

๐Ÿ  712 Empire Street, Charlottesville, VA 22901 | MLS#642390 | $475,000 | ๐Ÿ›๏ธ 3 bed ๐Ÿ› 2.5 bath | ๐ŸŽ‰ OPEN HOUSE Sunday, June 11th from 12 PM - 2 PM, hosted by Troy and Josh!

๐Ÿ  2084 Elm Tree Court, Charlottesville, Virginia 22911 | MLS#642457 | $350,000 | ๐Ÿ›๏ธ 3 bed ๐Ÿ› 2.5 bath | ๐ŸŽ‰ OPEN HOUSE Sunday, June 11th from 11 AM - 1 PM, hosted by Abby!

๐Ÿ  109 Turtle Creek Road, Unit #7, Charlottesville, VA 22901 | MLS#642405 | $200,000 | ๐Ÿ›๏ธ 2 bed ๐Ÿ› 2 bath | ๐ŸŽ‰ OPEN HOUSE Sunday, June 11th from 12 PM - 2 PM, hosted by Jess!

๐Ÿก โญ๏ธ FEATURED LISTING | ๐Ÿ   3455 Steamer Drive, Keswick, VA 22947 | MLS#642172 | $685,000 | ๐Ÿ›๏ธ 4 bed ๐Ÿ› 3.5 bath | ๐Ÿ“ 3235 SF | ๐ŸŽ‰ OPEN HOUSE Saturday, June 10th from 11 AM - 1 PM, hosted by Zoya!

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๐Ÿ  712 Empire Street, Charlottesville, VA 22901 | MLS#642390 | $475,000 | ๐Ÿ›๏ธ 3 bed ๐Ÿ› 2.5 bath | ๐ŸŽ‰ OPEN HOUSE Sunday, June 11th from 12 PM - 2 PM, hosted by Troy and Josh!

๐Ÿ  1072 Delphi Lane, Charlottesville, VA 22911 | MLS#642401 | $650,000 | ๐Ÿ›๏ธ 4 bed ๐Ÿ› 3.5 bath | ๐ŸŽ‰ OPEN HOUSE Sunday, June 11th from 2 PM - 4 PM, hosted by Brentney!

๐Ÿ  109 Turtle Creek Road, Unit #7, Charlottesville, VA 22901 | MLS#642405 | $200,000 | ๐Ÿ›๏ธ 2 bed ๐Ÿ› 2 bath | ๐ŸŽ‰ OPEN HOUSE Sunday, June 11th from 12 PM - 2 PM, hosted by Jess!

๐Ÿ  2084 Elm Tree Court, Charlottesville, Virginia 22911 | MLS#642457 | $350,000 | ๐Ÿ›๏ธ 3 bed ๐Ÿ› 2.5 bath | ๐ŸŽ‰ OPEN HOUSE Sunday, June 11th from 11 AM - 1 PM, hosted by Abby!

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    ๐Ÿก โญ๏ธ FEATURED LISTING | ๐Ÿ   3455 Steamer Drive, Keswick, VA 22947 | MLS#642172 | $685,000 | ๐Ÿ›๏ธ 4 bed ๐Ÿ› 3.5 bath | ๐Ÿ“ 3235 SF

Take in the gorgeous sunset view from this immaculately-maintained 4-bed, 3.5-bath, 3235 finished sq. ft. craftsman home!

Located within the highly sought-after Rivanna Village neighborhood, this home is only 3 years old (built in 2020, Ryan Homes' Columbia floor plan)!

This home offers all the essentials and more, including a dedicated first-floor home office/study with French doors, a finished basement with a full bath and a generously sized storage room, and a private primary suite with a sitting area, walk-in closet, two sinks, and an oversized 58"X46" glass shower.

Prepare meals in the large eat-in kitchen with an extended island, endless Thunder White granite countertops, and glistening stainless steel appliances, or grill out more casually on the Trex-covered back porch and paver patio!

Wave to neighbors from the rocking chair front porch, entertain friends around the built-in fire pit, and allow your dog to happily roam free in the fenced-in backyard!

๐Ÿ“Located just 8 minutes from Pantops and 15 minutes from Charlottesville's Historic Downtown Mall, 5th Street Station (Wegmans, Alamo, shopping, restaurants), and UVA/the hospital!

๐ŸŽ‰ Ready to start the next chapter in your story? ๐Ÿ’Œ Email showings@storyhousere.com with any questions and/or interest!

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