Profile picture for gnasses

How does a Loan Mod affect credit if you have always been current

Have always been current on blended 80/20 at 8.5% with CitiMortage as the only servicer. This was only loan I could get 2.5 yrs ago due to BK/forclosure in past and had prepay penalty due to expire in May 2010. I have always been working to prepare for a refi, but looking at sales in the area I am beginning to doubt we will be able to appraise at a value that will allow even an FHA refi. Loan is not owned by fannie/freddie. I talked to CitiMortgage about a possible Loan Modification under the current HAMP plans, and they said I do qualify, and will reduce interest to 7.35% which take pmt from $2250/mo down to $2070/mo and cannot refi out or modify for 12 months. This is not the ultimate answer, but would help my finances in the meantime.

Question is if anyone knows how the mod will affect my credit immediately and after the 12 mos is done. Citi says they will not report any negative info, but that the mod will show up on my credit report as a legal requirement. If I never miss any payments on anything, how bad of a hit will this really be? Nobody seems to know since most Mods are doen for those already way behind so they don;t really care abou the credit hit, since theirs is already damaged.
  • October 24 2009
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Answers (6)

Profile picture for gnasses
Well, I applied for the loan mod. Big mistake.They disabled my online payment option and when I called in told me that in order to stay current I would have to make the normal payment AND the reduced trial payment. WHAT! They also told me that the statute says that you have to have negative info on your credit and that even filling out the online app and submitting will give your credit a hit. I told them no way, becasue this will lock me into this loan since my credit then won't allow a refi even after the 1yr period is up. I feel like this is a scam to trap you in a loan with them you can't refi out of, and they make more $ from teh government incentives than they reduce in interest. Only after checking out loansafe.org and calling the executive response unit did I talk to someone who admitted their original rep mislead me and agreed to wrok with me to remove any negative credit info that shows up for just clicking through the links on their web page because I was "concerned about making my mortgage payments".

Total scam. IF you are current, DO NOT modify. I will keep paying and running up credit card debt and if values keep falling and I can't refi, I would rather stop paying and fight foreclosure while stashing the money under my mattress each month.
  • October 27 2009
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Citi can't tell you to go late on a payment, but some of the banks do say that which is how you end up impacting your credit.  If you every miss a payment or enter into a trial loan modification and miss a payment you credit will be impacted.  I have heard many stories about people trying mods on their own and I hate to say it but when you don't know what you are doing the banks take advantage of you.  That is great they are offering you verbally that rate, but proof is in the pudding as many times they just don't deliver and who knows what else they will say you need to do along the way.

I would have them send you the paperwork immediately to make them show you that they are really offering you that.  They may back peddle and say well we have to start you in a trial loan mod. 

Our Attorneys have been able to get homeowners loan mods before the 12 months is up after they already executed a loan mod.  In general, you do have to wait awhile before you try again.  If you don't want the headaches and want a professional you can check with an Attorney to handle it as maybe they can get a better deal for which depends on your financials and hardship.

We have a bunch of information that may help you at http://www.callalms.com/loan-mod-faqs

  • October 27 2009
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Many loan mod payments are considered 'late' or 'delinquent' because you are not making your full payment as originally agreed (especially during the investigation stage when the modification isn't complete yet). The bank may have said you can make a lower payment, but it's still not a full payment. That being the case, they can report delinquent payments to the credit bureau. I encourage you to carefully read the paperwork your bank sent regarding the loan mod.
  • October 28 2009
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Here is more clarification on impact to your credit.  Also, I am writing a detailed article on this that will clarify things more on our website.  Unfortunately, it is a lengthy article.

If you are late on your mortgage payment or do not pay your full mortgage payment then your credit is negatively impacted.  So, this means in most cases if you accept a trial loan modification and you are paying less then what your original loan was, then you will get a deragotary on your credit report.  So, if you sign up for a 3 month trial then you will be late for 3 months eventhough you have made a mortgage payment, but it is usually less then your original contract.

Now if you are not in a trail mod and pay your mortgage on time then you are fine.  But if you are ever late or don't pay the full amount then you will get hit with a late on your credit.
  • October 31 2009
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Profile picture for j.chase
Most lenders will report you late even though they will tell you otherwise.  It is almost required that they do this in order for you to qualify for the modification.  A modification requires a hardship and being on time with the mortgage is not a hardship.  In an effort to help, many lenders will report you as late because you are not paying your loan in accordance with the original Note.( Under the forbearance agreement your payments are usually less).  Most people experience a drop of 150 points.  However, it is pretty easy to make up the lost ground once the modification is complete and you can start re establishing better credit.

For more information or help please feel free to Click On My Profile
  • November 01 2009
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Also, don't forget that if you accept a trial loan modification, that not only will your credit be negatively impacted because of the late, but it will also reflect that you are in a trial loan modification.
  • November 02 2009
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