Modified Loans Can Dent Credit
In the Business Section of the St Pete Times (January 10th edition), James Thorner wrote a great article that surprised me. The scope of the article involved the negative effects of loan modifications on credit score. Prior to reading this article, I was always under the assumption that a loan modification had no impact on credit scores. Mr. Thorner reports that, “If you accept a modification through Making Home Affordable, you’ll probably pay for it with a lower credit score. In some cases the impact could be as much as 100 points.”
Note that this applies to people that are current on their payments!! Meg Reilly, spokesperson for the US Treasury indicates, “Borrowers, including borrowers who are are current on their loans but are asking for modifications based on imminent default, are certifying that they are unable to pay their mortgage and need government assistance. These borrowers are a greater credit risk than borrowers who are not in imminent default and it is appropriate that the additional risk be reflected in their credit profile.”
So, buyer beware!