Central Florida Short Sales: A Loan Modification May Cost You 50 Points on Your FICO Score!!!

Reserved Parking For "The Lovely Wife"...TLW...ROAR!

Hun...

It's a conspiracy I tell you...It's a conspiracy :)

TLW...ROAR!

AmEx caused mine to go down by slashing my credit line 90%....guess I just gotta pay em off in whole.

p.s. try to do good and look what's happening all over....

Yikes, this is even worse than charging income tax on forgiven monies in a short sale!

Insane.  The mortgage companies appear to simply be taking all of their rage with the mortgage mess out on the consumer that took one of their loans.

IMO, this would violate the Fair Credit Reporting Practices and I'd have a nice letter going to my Congresspersons. 

Unbelievable.   They will look for any loophole they can find-and the consumers inevitably are the ones that suffer.

Oh, I get it. I'm qualified to do a loan mod on the basis of my credit and other factors but you are going to crucify mr for it.  Guess it's should surprise us given the other shanigans the credit card companies are up to. I agree with Lenn.

Jeff

This realy sucks. I wonder what a 50 point drop in your credit score will do to interest rates on your credit cards? Or if you go to buy a car? Maybe that's the point. You may modifiy your Chase mortgage but your rate on your Chase card is going to sky rocket!!!

Ugh!  This just makes me sick.  The harder you try the worse it gets.

They just keep making it harder and harder for everyone to get out of this mess!

AT LEAST!  It will also mean that you can't purchase/or refi for a while either!

Hi Bryant!
I am convinced that lenders are doing all they can to find ways to NOT make a loan or at the very least, take all risk away. It is frustrating!

So for those folks that try and do the right thing.  Try and modify their loan, they get dinged for trying to do the right thing?

We have so many other ills in this current mess to focus on...this is so NOT one of them.  Let's just hope everyone who needs  loan mod is over 800 before they start...

BB, I agree with you.  It is hard to not think that these lenders have been a huge part of the problem, the big institutions get themselves on the dole, then they skewer their customers!  Time for a TLW Counter Offer!  John

The "homeowners" of this good country are obviously the only ones more interested in doing the "right thing".  I am not surprised, but so disappointed at this action along with many others in the last 60 days.   It is becoming apparent that big business is making it's primary business to gather up all the marbles.  Incredible.

BB, this is just crazy, who the hell is watching out for us as we give them OUR billons to stay afloat and receive huge bonus's still. I want to scream!!!!!!!!!!!! Thank you.

BB...Aren't we all disgruntled with the "Games" ...short sales make sense...and also I'm up for investing in  a large sailing yacht and heading for a tropical paradise where life is human scale ...

Oh brother, WHAT next?

First of all it is VERY Difficult to get these even modified in Michigan. 

So now if you are Lucky enough to do it, you are penalized. 

I heard a short sale bumps your credit down aproximately 150 points and a foreclosure 250. 

Have you heard this? 

I was going to ask if selling short a negative on the FICO . . . Missy must be mind-reading again!

There are projections that half of all mortgages may be underwater by 2011 and the industry is tinkering around with this junk?  There is absolutely no common or financial sense in this segment.

"What will they think of next?" Something even more ridiculous I'll wager.

Interesting. What about a short sale?

Unbelieveable.  It's difficult enough for a person to own up to the fact that they are not making it financially.  So now they're being punished for trying to hold on to their home.  I agree with you,  might as well do the short sale and move on.

BB... This is very interesting. On a positive note of all this, at least it shows a partial payment instead of just 30,60, or 90 days delinquent or did I miss something ?

Have they come up with a box for adding short sale to the credit report like they do foreclosures and bankruptcies?  Also will a short sale hit the credit if they're fortunate enough (I know it's unlikely) to get one without a late?

Insane - haven't homeowners been punished enough???

Bryant - After reading the comments, I have a different view.  If they are willing to modify the loan, what does your credit score matter if you are keeping the abode?

The Credit Scoring Agencies along with the Mortgage Insurance Companies are making life more than difficult.  They are wagging the dog.  Ruff!

Unbelievable!

Not sure I agree with the previous comment from Jason about it not mattering if you keep the abode. What about increased interest rates on credit cards or car loans? They're likely to suffer if the points go down.

It seems no matter what, it always comes back to bite the consumer. I agree Bryant it sucks!

It seems there is no silver lining in the cloud called the 'mortgage mess.'

Sharon

What was it that Marie Antoinette said, "Let them eat cake!"  Of course we know what happened to her in the end.

Sue of Robin and Sue

Of course it dings your credit!  The "big three" are in bed with the banks and if your credit is bad the banks charge higher rates.  Round the circle you go!  

Unfortunately - nothing shocks me anymore - just makes me more disgusted.  This definitely is just another way for the banks to angle a way to up the interest rates on other products!

I think TLW is on to something!!!! :)

Whomsoever uses any of their systems will pay somehow. The only ones who are benefiting from our tax dollar bailouts are the bonus receivers. 

I, for one, am really wondering who is in charge? 

Whomsoever uses any of their systems will pay somehow. The only ones who are benefiting from our tax dollar bailouts are the bonus receivers. 

I, for one, am really wondering who is in charge? 

Sometimes i wonder what's the point of all these - how can one be sure when the finishing line keeps on moving?

Missy, That's interesting, because a bankruptcy usually lowers your credit score by 200 points, so foreclosure is worse than bankruptcy for your credit at 250 points and a short sale is almost as bad as bankruptcy at 150 points. 

BB - Any word on how loan modifications affect FICO scores?  FICO scores are still the most important scores for most people as most lenders rely on them for mortgages. 

Jesus Christ Bananas.

Loan Mod's have always caused a negative rating for the consumer.  Even before we looked at credit scores while underwriting a loan it was a bad mark if some type of modification of the original contract was in place.  It indicated a higher risk to the lender.

Any modification of the original contract shows the client does not have the ability to repay the debt.

Why should a client with a loan mod be given the same credit rating as someone who has paid as agreed?  

There are folks out there that worked 2 and 3 jobs to keep their credit clean during these hard times, why should they be treated equally?

I'm sorry if I'm not making a bunch of friends out here on the subject.

Hi BB... I agree with you 100%.  Isn't it great how they change the rules halfway through the game?  Ugh!

Melissa ... perhaps for the same reason that banks that sold crappy products are being kept on life support on the public dole.  If you want a viable recovery, what good does it do to prop up the complicit (at the very least) banks while not also working to make sure those institutions will continue to have consumers?  I am in a foreclosure/short sale plagued market.  Pretty soon, there will be few consumers who can purchase by current guidelines.  Something has to give or this crisis does not end with the current round of foreclosures.  It grows legs with the vacuum that will be created by those former homeowners who cannot reenter the market for 2 to 5 years.  For those who effect a loan modification rather than walking on their debt in a market such as mine, such a penalty has become arcane.  The problem is too prevolent.  Take these people out of the consumer pool and we are in deep, deep trouble. 

It's time for the banks to work with the public that is keeping them afloat.  A fine start would be to not penalize the homeowner who wants to stay in their house and make payments they can afford.  As for the inherent fairness of this, please.  Let the guy working 3 jobs modify his loan with no ding as well.  It's the least a trillion or so dollars of taxpayer money should buy.

I have to agree with Paul on this.  A person who is doing loan mod is at least trying to stay in their home even though their equity has diminished greatly  There are so many people who are just walking away, whether thru short sales, or foreclosres, or now a days, bankruptcys (using up their maximum credit line and walkng away along with their mortgages).  Help them keep their homes and, in some way, stablize the housing market, is not such a bad thing to do.   

Have to ditto Paul on this one. It makes absolutely no sense for the banks to penalize people for trying to keep their homes by working out an agreement that fits their current economic situation than force them to abide by the original agreement - one which will ultimately cost them their homes.

They continue to deepen the hole many consumers are trying to climb out of !

BB...

I just wish that somebody, somewhere, would get a clue and understand that all of this crap just delays the advent of any kind of recovery!

So the banks that helped get us in this mess, who are now using the taxpayers money to keep themselves afloat are actually prolonging the problem by forcing people to pay more interest to them. American consumer debt is now approximately 2.5 trillion, that looks like this.

                                                   $2,500,000,000,000

I Think!

I agree with Melissa! After all, the banks didn't know the homeowner couldn't afford 12% after a 2% teaser rate. The lending industry didn't know they were making tons and tons of toxic loans.

Any modification of the original contract shows the client does not have the ability to repay the debt.

How about: Any modification of the original contract shows that it was more important for the bank to make the loan than to verify the client has the ability to repay the debt.

But once again, lenders didn't know they were making toxic loans. It's all the consumer's fault! Real Estate agents are also to blame! After all, they held all these home buyers at gun point, forcing them to lie about their income.

Loan modification is a responsible approach. Responsible does not matter so you may as well do a short sale. Wait, that is responsible too.

Okay, I see the point.  But shouldn't the borrower who DOES pay their loan based on the original terms have some advantage?  Should they get some extra point for doing what they said they would?  Just a thought.  

All will come full circle in the not too distant future.  Remember, banks are in the business to lend money.  If made too restrictive, no lending occurs, stakeholders with the banks get testy, banks find a means to get the money out on the street.  It's all about capitalism.  If you shut it down, all suffer in the long run.

Andrea and Darrin- I have to disagree.  The lending industry DID know they were making tons and tons of toxic loans. 

To punish home owners for modifying is just bizarre.

The amount of modifications being done is so miniscule that the hit on credit scores probably won't make much of an impact but it seems ridiculous for the government to be giving their blessing for modifications and then allowing the credit bureaus to punish the home owners.

I work with short sales in Oklahoma. I haven't seen a loan mod work yet. I could say that a 50 point drop for a loan mod seems paradoxical. But to understand paradox you first need to be sane. This is insanity. 

BB, it is amazing to me how you can sneeze sometimes and your FICO score can be affected adversely.

This is when it is time to write to your representative in Congress.  Totally disgusting - but not entirely surprising.  The last 30 years of republican rule are to blame for much of this.  Since we have a country by the corporations and for the coroporations - what do you expect?  The dems - though in good part to blame for going along with a lot of tis - are at least saying "Enough!"  But the special interests in D.C. are thwarting efforts to bring the country back to the people - where it belongs.

To those who think "regulation" is a dirty word - think again. Regulation can stop a train wreck like this. And ifyou are worried about the government taking over - STOP and think....do you prefer having corporate America and the banks in charge - because you are seeing the results of same now.

This is unbelievable, and there really is no out here. I think the mortgage companies are taking their frustration with the situation out on consumers as Lenn stated.

There is no reason in the world why people that are trying to save their property by trying to work out a deal with the bank should be penalized for it. 

So they do a loan modification, then their credit score drops, credit card rates rise, and then they can't afford the newly modified loan. What a they thinking...

Gary - So THATs it!  I sneeze about 40x a day on average, pay my bills on time, and my scores suck. Now I know the secret! :)

Overall, I think it makes sense.  They shouldn't be treated AS well as someone who has fulfilled all their terms on credit.   It makes sense from a business standpoint in normal times.

However, I do think that right now we need cooperation to get out of this mess.  So they do a loan mod to pay what they can afford.  Get dinged 50 points, their credit card payments go up and boom, now they need another loan mod to get out of that hole!

And as someone else pointed out - with excess inventory in most areas, and homeowners that still HAVE to move and sell, we're going to be in a world of hurt if everyone's credit is so scarred from this mess that it's 5 years before they can buy.  2 years from now, noone will be able to sell because there's noone that can buy. 

BB

How would the banks feel if the government modified and lowered their score based on the fact that they couldn't make their payment either, until the government bailed them out with taxpayer monies.

Bryant,

You've got a good heart! That should lead to a long life!

But, your sympathies are all wrong! A 50 point hit that will go away in 6 months is nothing for some one who just technically defaulted on their original note and profited from it.

Don't you believe there should be any consequences for personal actions?

The entitlement crowd has become so jaded that many don't recognizes themselves as the Communist they've become! A borrower's changing circumstances are the bank's problem also, but not their responsibility!

If you want to rant go after the system where three private companies at least one of which is not even American any more have gone from sloppily reporting facts to clandestinely making social policy. Go after Fair Isaac and Company who set arbitrary standards that can only be validate anecdotally. FICO is not a credit reporting agency there is no control over their actions at all, more importantly there is no required accountability!

Another even bigger injustice is "universal default" if you have any dispute with a creditor or a settlement your credit cards are all likely to go to the maximum interest rate, despite your payment history!

Bill

In California I have heard several loan reps say that the short sale may reduce the FICO score from about 75-125 points, with foreclosure being in the 250+ range--however, since many people have stopped paying on their mortgages, there will be consequences for 30-day lates as well. If loan mods are going to cost 50 points, some people might want to consider the short sale (I think)>

A loan modification should hurt your credit rating.  A loan mod means you aren't meeting your debt obligations.  Why should someone with a loan mod have the same credit rating as someone who is paying their contractually obligated debts?

I don't see anything remotely unfair about it.

The only time I can see this being an issue is that some lenders did "loan modifications" voluntarily whether the borrower needed it or not as a way to drop rates without having to go through a drawn out refinance process.  I am not sure that they are reporting that the note was modified though.

I had not heard that. Thanks for sharing. It is a good thing to know that we can mention to our clients when we speak with them about options.

To qualify for a loan mod, you have to be behind in payments. Therefore, your credit is already taking a huge hit. Another 50 points usually doesn't matter by this time.

Unfortunately, lenders and the credit reporting agencies are no friends of consumers. Consider how long it takes to build a credit score and how quickly it takes to ruin it. A bankruptcy takes 200 points off your score. What can you do to add 200 to yours? Nothing....absolutely nothing. If you were to pay off all your debts, you will not be rewarded. In fact, just the opposite will happen. You will have no credit score at all. Oh, and let's not forget how resistant credit reporting agencies and lenders are to correcting your credit report when your identity has been stolen. Credit reporting is constantly under scrutiny from consumer advocacy groups and the federal government, and rightly so.

As mentioned in a previous post, current practices by lenders will only hurt them in the long term. Already, many of my customers are ditching credit cards and refusing to use them any more. Eventually, lenders will start sending out their credit offers once more and find the market is less willing to go in debt as they were before.

Furthermore, credit reporting agencies are seeing more and more competition from alternative sources that track cell phone payments, electricity bill payments, and other non-debt type obligations. It's just a matter of time.

Bryant - Thanks for the news flash on that....  In the end EVERYONE's credit is getting dinged in this economy!

Erin, of course the banks knew it. My comment was tongue in cheek.

I'm hearing about loan mods being difficult in some states. For what it's worth, we did a mod on our home in lieu of short selling it and while it took "Countrywide Bank of America" FOREVER to make us a modification offer, we got it done in the end, are now up to date on things.

Pretty soon EVERYONE's credit score will be 212.  What with all the credit card companies lowering people's credit limits and all the other things the lenders do to penalize you NO ONE will be immune unless they have NO credit score.  American Express is one of the most aggressive limit lowering card company out there but one major insurance company / financial services co / bank is lowering limits on people who DON'T USE or carry very low balances on their card.   They figure if they don't use it, they don't need that high a limit and better to lower it now.

Severalof my very good friends, hard working people with families are benefiting from these loan mods.  Without them, they would have had to go into foreclosure.  They are sticking it out and working hard to keep their house.  I am thankful that they received the loan mods.  I don't agree that they should be penalized with their FICO scores for keeping their house and trying to prevent the foreclosure.

A 50 point hit can be devastating to a person. That is a serious hit for someone that is trying to get their financial ducks in a row with a re-fi. What will they think of next?!?

Brian...I must agree with your lovely wife..It is a conspiracy for sure...

Hi BB - I thought that the whole point of a loan modification was so that neither the borrower nor the bank loses. It was to help the banks so they wouldn't have so many foreclosure losses, and help the borrower protect their credit and their home.  I'll have to write a post on this, referencing yours.

If you're saying you get dinged 50 points FOR A LOAN MODIFICATION then what's the BIG? If they've successfuly modified their loan and are able to stay in their home then 50 points is a small pitance. Be on time and clean up your credit cards and get your financial house in order also and the 50 points will dissipate over time.

  We seem to have so many Lender,Mortage Brokers, Realtors and Agents who are still pointing their fingers at the reasons' why we all got into this mess and should be taking a long look in the mirror! There is NO FREE LUNCH folks! Let's cut the crap and become part of the SOLUTION instead of the constant whinning and being the PROBLEM!

  And in case you haven't figured it out the Bank's have us all on a string nowadays. This is the "market of the moment". You can choose to work within it or move-on. In our area of Sonoma County we have little loan mods happening (but plenty of folks wishing to do them!), Short-Sales solds comparables for the entire county of Sonoma a paltry 86 for July, REO's a two to three week supply of product and forclosures making up 46% of the market! HVCC isssues with appraisals not coming in at our sales prices plus underwriting guidelines tightening and becoming even MORE restrictive. So, who do you THINK is NOW controlling the marketplace?

  Juxtapose the above with the go-go market long gone of easy money, lax underwriting and hyper appraisals---Banks were controlling THAT market too! Guys! Tis the market!

I was just notified by CitiBank that my interest rate would be going up...or I could opt to close my account. Since I have never missed a payment, never been late with a payment and have never made anything less than a full payment, I chose to close the account because I refuse to accept punitive measures for exemplary performance. I used to wonder where it would end and now I wonder if it will end.

The answer to your question BB is quite simple BB... there are plenty of people who want to keep their homes and not do a short sale.

Another clear example where the consumer gets the shaft. . . with Government supplied Vaseline for all the bankers!

Sorry guys.....I have been swamped and haven't had a chance to make it back here. I have however read every commenr and as always appreciate you stopping by.

Michael, This would all be different if we didn't give the banks trillions of dollars in bail out money. It just seems the ones getting the shaft are the consumers. I completely agree in accountability. I also believe that accountability needs to be a two way street but unfortunately it's not. This is the reality....not blame.

Seems to me you can fight that on www.annualcreditreport.com by making an online dispute.  If the borrower was never late and the loan is reporting paid in full dispute the entry and ask for an investigation of the file.  I would not let this fly on my credit report and taking the proactive approach to your credit will be the only recourse to help your credit.  Maybe it will take every month for six months of fighting with the top three but you will eventually win. 

I have had several customers go back and fight credit entries and have cited fair debt collections act and had files corrected.  Again, the customer has to do this not the Realtor.  Best if we stick to selling and not the credit repair business.  No issue with providing the reference but let them get mad at the lender over this BS not us. 

This is a really difficult time for all borrowers and the lenders sure make you wonder "who is getting all these modifications" and "just how many lenders are really keeping families in their homes".  I work with all walks of life and I see small reductions in cases where the lender should slash interest or cut principal.  Not going to happen this year and more and more folks are going to be on the street.

One more way that troubled homeowners are being penalized by the system. I just had someone tell me why should he do a short sale when his credit was wrecked anyway? It's actually easier on him (he thinks) to just pack his bags and leave.

Why not just do a short sale? I think your credit score is dinged a whole lot more than 50 points when you do a short sale. Will the lender negotiate that reporting in the process of the Loan mod?

I think if they love the home the loan modification could be good, but if not, I agree move on and get an even better deal than your bank is offering you!

Hi All,

Im new here.  so lets think about this 50 point deal here for the Loan Modification.  I am a paralegal and a realtor and I work for an Attorney/Broker.  Some clients may be current when they modify their loan but some are already late.  So when you have one late payment your credit score already goes down.

I find this interesting that Realtor think why keep the home if your are going to get a 50 point ding on your credit that may go away after 6 months of paying on time.

Lets think about it as if it were your home.  You put down $100,000 your hard earned savings.  Now your income dropped so your having a hard time affording the payment.  Some realtors who dont do loan modifications and dont know that much about them prefer to do the short sale for their benefit not the clients.  But for the homeowner, they do want to keep their home.  My clients dont care about their credit.  And lets face it if you cant afford your mortgage why will you be buying a car in the near future. 

I have gotten incredible results for my clients becuase I know how to do them.  I just got a client approved last week for the Making Home Affordabl Program.  His home dropped $100k as well as his income. However I got his new payment to 31% of his current gross income including PITI and that includes HOA if they have it.  So his new payment is half of his old payment.  Lets take off our realtor hats and commssion hats when thinking of others who are in financial distress.  Think about truley having a client for life!! 98% of my business comes from referral from happy clients.  I have about a 60% success rate on modifications.  

So i honestly think before you say they should just short sale their home find someone who successfully does loan mods and work with them on a referral basis.  We do that as well, if we can modify then we do the short sale after as many attempts as the homeowner wants.

I just had a hard time listening to other realtors saying that the only option was short sale..

JoAnna Jensen

Volo law

Realtor Paralegal

California

925 699 5041