Surprise! Signing up for mortgage assistance program drops your credit score

WASHINGTON (AP) -- Some homeowners who sign up for the government's mortgage assistance program are getting a nasty surprise: Lower credit scores.

For borrowers who are making their payments on time but are on the verge of default, the Obama administration's loan modification program can reduce their credit score as much as 100 points. That makes it harder to get a loan and can present a problem when applying for a new job.

Housing counselors say it's unfair, especially because the news often comes as a surprise to homeowners.

"Why should people's credit be hurt even worse when they're trying to do the right thing?" said Eileen Anderson, senior vice president at Community Development Corp. of Long Island, a housing counseling group in New York.

And many homeowners are angry that a program designed to help carries such a penalty, said Kathy Conley, a housing counselor with GreenPath Inc., a nonprofit group in Farmington Hills, Mich.

"It's a feeling of being duped," she said.

Still, the impact is far less severe than a foreclosure, where borrowers typically find their credit is in tatters for years. That's due to the cumulative impact of many months of missed payments and the foreclosure itself, which drags down a homeowner's' credit by 150 points or more on a scale of 300 to 850.

To enroll in the Obama administration's $75 billion "Making Home Affordable" program, borrowers enter a trial period in which they make at least three payments. But some are finding out that their credit score takes a dive during this trial phase. It happens once their mortgage company notifies the three big credit bureaus -- Experian, Equifax and TransUnion.

http://finance.yahoo.com/news/Credit-scores-can-drop-after-apf-1601705094.html?x=0

- Brazil (1985)

If you have a good credit score it usually means you have more money that most. It does not mean you are some kind of exceptional human being. But we use credit scores as a means to define a persons morality or ethics.

You lose a job, you fall behind, your credit score goes down. You apply for a job and you are judged by your credit score as to your worthiness to have a job.

The reason you're not in great financial shape does not matter.
Not to mention that the score may be based upon erroneous information.

Even though, someone at Experian definitely didn't realize that when the house was purchased, I was only 3 years old. A simple comparison of year of purchase and my birth year would have told them that. However, that would require that some pencil pusher actually take the time to verify the data.

The confusion on the report is due to the fact that my father and I have the same first and last name, but different middle name. In addition, I lived at home for the first 24 years of my life, while I was in college and the first year of my first job.

So, two males, with the same first and last name, and same address. Father and son.

Yet, that mistake continues today, and I still can't get it resolved. After three unsuccessful attempts to correct it, it's still there.

It was a credit liability for me for a decade when I applied for loans. I was denied a car loan in the 1990s because of it, and I tried to explain to the auto dealer about that house on my credit report they got. They just said "you need to talk with the credit agency about that." They didn't care either.

Fortunately though, my parents fully paid off the mortgage about nine years ago, and their house that is listed as being also owned by me on my credit report, now gives me a good rating, because Experian now sees a $250K asset in my name instead of a liability.

I guess that's why I regularly receive offers for high-limit gold/platinum credit cards.

Several years ago, when I was trying to get errors corrected so I could purchase a house, I actually had one of them (can't remember whether it was Experian Trans-union or Equifax) hang up on me. I wasn't being rude, but they certainly were.

They keep those scoring secrets close to the vest for a reason. Still, I'd rather have some help and lose a few points than not get any help at all. If you can't pay your bills on your own the credit bureaus are bound to take it into account.

Seriously, this is just too fucking much.

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..as millions of Americans were, according to federal investigation and congressional testimony.

:)

Going through that now :grr:

:shrug:

The stuff you own... owns you.

And yes, I'm totally owned (or is that pwned?) by this mortgage. Ah well...

Sorry.

I'm just happy to be credit-free and unworried about my credit, even though I won't be owning a home any time soon. The trade off (peace of mind) is worth it for me.

But that's me... your mileage may vary! :)

People can steal it and ruin it without your knowledge. The SS# has become a very dangerous thing in the hands of strangers. Trust me, I know.

I also had somebody get tickets in my name and I lost my driver's license. You got to watch your behind out there....

I'm still glad I did it. Getting my own home is one of the best things I've ever done -- even IF I sold my Apple stock to make the down payment (true story, unfortunately).

I refinanced a couple months ago. The only reason I did it was to lower my monthly payment by $100 or so since rates were so low. My bills were being paid on time and I was not at risk of losing my home. My credit score was golden, I had funds available for closing costs.

At some point right near the end of the process I found out that I 'qualified' for and was refinancing under this program (Making Home Affordable Act). I'm still not sure what benefit it was to me. In fact, because I was being put under this program I had to set up an escrow for taxes/insurance, which was no big deal but I hadn't planned on it.

I actually felt a little weird knowing that, for some reason, I was being counted as a success story for this legislation since I didn't ask for it and I didn't need it.

Now I'm sorta pissed :shrug:

I may contact the loan person I was working with just to figure out why I was put in the program - but I got the impression it was automatic and not really a choice on my part. I think part of it was because I live in an area (SE Michigan) which is practically black-balled as far as credit/lending for mortgages goes and I wouldn't have gotten a low enough rate to make the refi worthwhile otherwise..


I'll definitely want to look into my credit score.

Hmmm..

under the Obama plan. Reduces her monthly payment of $1,100/month by $68. Lawyer told her Chase just wants every penny.

Geez. The only reason my payment went down so much is because I had a terribly high rate before (6.75%) (due to having to refi a couple yrs ago due to...a long story)

Thinking about the fact that your GF with her $68 savings and me with my complete lack of need for the program are going to be statistics to display its success...

Makes me wonder what this implies about all the projected success of HCR...(sorry, totally O/T but it came to mind)

to see if house was in foreclosure or not. Retired on SS.

as a reward for their irresponsible borrowing. The credit score ding just means they're getting the same something for slightly less nothing. If the program allows you to keep the house you couldn't afford, don't complain about the ding on your credit score.

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For getting your own talking points right from the source.

Now people are trying to blame the way credit agencies operate on Obama?

not just hurt.

agreed to, then it seems to make sense that your score goes down.

For the record, it's not like I'm sitting back in a tub full of money making judgments on those in a financial jam - I am unemployed and likely about to go into foreclosure. And I absolutely expect my credit to suffer, as I failed to live up to my end of the agreement.

Offend one of the "nobles" and you might as well register as a sex offender. This has gotta stop.

They have the People coming and going.

I was told my credit would be trashed when I entered a consumer credit counseling-type plan for my credit cards - I was told this by the person signing me up.

I was ok with that, because I didn't expect to make any major purchases for a long while, and I needed to fix my credit card mess.

However, to my surprise, when my wife started bugging me about buying a house, it turned out my credit wasn't so bad, after all. It wasn't great, but it certainly wasn't bad. The rate I got on my mortgage turned out to be decent. Not like the really low rates a lot of people have been getting, but I was happily surprised.

In a few years, after the credit cards are paid off and I have some years paid on the house...assuming no financial crises in the interim (though getting a pay cut at work could be a major problem) - I will probably have really good credit.

Just saying - yes, credit scores can drop, but it's not necessarily catastrophic.

Of course, I didn't apply for the mortgage until what would have been well beyond the 3 month trial period mentioned.

Ultimately I was laid off one day and got a job offer the next. I never missed a house payment. I eventually got paper work a month or so after I asked and they said I didn't qualify. No biggie, I had a job, and I looked through the paperwork if there was something to sign saying "I decline your offer" (to do smaller payments for 6 months and tack the difference on the end of my loan) and there wasn't anything to sign.

All right, so I have a new job and it's a few months later and I go to trade in my car and my friend is working in finance at the dealership. He asks me, "are you on a payment plan for your house?" To which I reply "um, well yeah I have a mortgage."

Come to find out my mortgage company reported to the agencies that I was on the payment assistance program when I wasn't. I had never missed a payment. I was furious, my score had gone down almost 100 points. My rate for the new car was crazy. Of course the mortgage company doesn't have anyone that can handle this on a Saturday, so Monday morning I called and ripped a few new ones. They had to take that off my reports and send me a letter stating they had reported incorrect information. It took talking to multiple people to get that straight. And then it takes at least 30 days to reset your scores.

After two months I refinanced my new vehicle with my credit union and have a much more reasonable interest rate. I've been trying to refi my house with them, but since I have student loans and have to state my current income level, I can't get approved. The lady working on it has been trying, since I'm still a student and my income will go up substantially once I graduate. She said since everything has tightened up, someone like me, who should be approved will get denied.