My answer to the question, "What happens to your FICO score after a loan modification?"

[Lel]

According to the CDIA reporting guidelines for loan modified under Making Home Affordable, once the modification is finalized it is supposed to be reported with the comment code CN: "Loan modified under a federal government plan."  As mentioned above, this does not have a negative impact on credit scores - at least not yet.  If Fair Isaac's statistical analysis of loans with this code demonstrates that borrowers who receive MHA modifications are still defaulting on their mortgages, then this code will eventually result in a negative effect on scores.  It's too early to tell.

Big, big caveat about what I wrote above: the guidelines that I'm have are 1 year old.  The CDIA has since updated their guidelines, but they also blocked public access to these guidelines.  If there has been a change in how modified loans are supposed to be reported, then I don't know what these changes are.  But when the CN code "went active" in November, there were a few scattered newspaper articles to indicate its existence.

Second big caveat: it is possible that these CDIA guidelines are exactly that - guidelines.  Not requirements.  There may be no hard and fast rule that says that modified loans must be reported in a specific manner.  That is, the CN code might be recommended, not required.  If this is the case, then your lender cannot be compelled to report your loan with the less derogatory comment code.  Keep this in mind when you contact your lender about how your loan is reported.

If I were in your situation, I'd contact Citi and ask them to remove comment code AC and replace it with CN.  Since you don't know exactly what the current guidelines state, you probably shouldn't be too demanding in your request.  Hopefully they'll change the reporting for you.

One last question: you mentioned that you had been working on your modification for over 14 months.  The modification was finalized in February.  This means that you started the modfication process before the Making Home Affordable program was conceived.  Which government program did you use to get your modification?  Was it Hope for Homeowners or perhaps Freddie's streamlined modification program?

[Anonymous]

It was the Making Home Affordable Program.  You are right, this program was not in place when I first applied (Nov. 2008).  However, Citibank was a nightmare to deal with and it seems the right hand didn't know what the left hand was doing.  They kept kicking back my request saying I didn't send in necessary paperwork when they wouldn't mail a request to say what paperwork they needed.  They admitted to have "glitches" in their system.  Due to my persistence and strong will :-) , I didn't give up and kept at them, following up each step of the way.  Needless to say, it was an extremely bumpy ride, to long to write all the details of their incompetence.  Finally, when they indeed followed up in writing (November 2009) to say they had everything they needed and a decision would be made within 30 days, I received the decision almost 90 days later.  Thankfully, it was in my favor.  Most people would not have endured what I did.  I think they hope it is that way.  I will heed your advice and ask they change from the AC code to the CN code and see if that helps. 

[Anonymous]

Well I wanted to report back to you as I followed your advice.....and I am feeling a big WHOOSH!!!!!  of relief.  I sent my mortgage company a well crafted letter asking them to change their code on my credit report and they did!!  I am very happy to report my FICO score has gone back up, even higher than it originally was!  At last check, the Equifax score was 816 so needless to say, I am thrilled.  Thank you, thank you, thank you, for your help and advice.  This was the first time I was on FICO forum and I will definately be back!  I am very grateful for the outcome and I guess persistence does pay!  Best of all, my mortgage is more affordable now.  I really wish I wasn't in need of a modification in the first place but my husband's income has plummetted by 80% (Self-employed carpenter, recession effects) and now we not only keep our home but also our valuable credit rating that we work so hard to maintain.

Thank you again!

[Anonymous]

Lalv67.......

I am running into the same problem with my fico score being tarnished. You mentioned writing a "well crafted" letter to the mortgage company to get the coding changed. I was wondering if you could post a copy, or modified version so I could use to write to my mortgage company. Obviously, the personal information should be omitted. Any help will be appreciated.

This whole process has been a drain. We were never late, just had decrease in income. I panicked thinking we would eventually go into foreclosure, it never happened. Income regained, but still in this "trial period". Problem is, since we didn't escrow prior to going into trial payments, Our payments actually went up. They included taxes and insurance. So the entry on my report "partial payment" isn't exactly accurate. Anyways, FICO score dropped about 100 pts. No one told me about the credit ding, so I was shocked when I tried to re-finance my vehicle. Then, I tried to exit the program and they told me my payment would go up $900 because they include the current rate 6.7, plus the escrow amount. Even then I was going to make the payments and refinance at the end of the year. So I am stuck. 

I thought this program would help, but with all the phone calls requesting additional information, the sudden ding on credit and the hassle of it all, I wish I would have never heard about it. I would have been better off, waiting and refinancing on my own. Rates shouldn't jump significantly within the next year anyway.

Signed......troubled.  

[ESO]

Any luck with the letter guys?

[Anonymous]

The letter to the mortgage company stated as follows:  "I am writing to dispute an entry on our credit reports.  It has come to our attention that there is an incorrect entry in how the loan is reported.  It currently says "Paying partial payment agreement" on an "AC" comment code.  We were told by a credit counseling specialist that this code should have been changed to "CN" after documents were finalized which states "Loan modified under Federal Gov't Plan"

Please correct the entry to reflect the correct status of the loan.  We value and work hard to keep our credit at its best.  I appreciate you correcting this matter expediously.

Good luck!!  I am a believer in being proactive in your life....it my case, it certainly paid off (with some tears, kicking yelling and screaming, but it was worth it!)

[Anonymous]

Congratulations on your success story, lalv67, and for sharing your experiences which will certainly help others.

WE ALL have heard, even up to this moment, the horror stories of people trying to get their loan(s) modified. Stories of people being denied or approve only to learn that their good credit got hammered, runs rampant.

HOWEVER, throughout my personal experiences dealing with home owners, buyers, sellers and lenders. I discover that most “denied” loan modification and other related issues, such as damage credit scores, could have been avoided if the applicant had been just a little more vigilant. 

Studies have shown that 90% of denied loan modification is a direct result of the applicant(s) NOT following basic instructions. ANYONE applying for a loan modification, MUST be  prepare to submit some documents more than once. In some cases up to 3 or 4 times. Banks tend to be understaffed in this department and swamp with modification request. Prepare to Call them at least 3 times per week to check the status. Leave Nothing to chance. Be vigilant don’t let the trail get cold.

IN addition, for a variety of reason, some of which are obvious, I would recommend that your initial contact with the lender regarding starting a modification should be in writing sent via certified mail address to the appropriate individual/department. Often times people call their lender to apply for modification only to get surprised or caught off guard with a barrage of questions they did not anticipate or adequately prepare to answer. Next thing they hear:  "I’m sorry, you do not qualify for a loan modification at this time. Have you thought about a short sale?" This happened a lot to people who are qualify and is ONE of the many reason I recommend your initial contact be in writing.

THE seven key steps to follow. Gather up:

1. Financial Worksheet
2. Hardship Letter
3. Bank Statements
4. Tax Returns
5. Complete Documents FULLY and correctly
6. Submit Application
7. FOLLOW-UP at least 3 times per week

Your HARDSHIP Letter is the KEY and MUST contain at least 3 key elements.

1.  Explain exactly the circumstances what happened or what you anticipate happening that has cause your current financial predicament. IT is Very Important that you Include your Loan # clearly on every pieces of document or communication sent to the bank.

2. Tell your bank things that you have personally done, up to this point, to try to make the situation workable. Example: you cut out unnecessary expenses, you took in a roommate, a family friend had to assist you financially, etc.

3. Finally, in your closing you need to accomplish two things: Let the lender/bank know that you have explored and tried every other option at your disposal, and only a loan modification will allow you  to “keep” your home.  Next step is to obtain the readers empathy. This can be accomplish by including some details about your involvement in the local community, church, school, kids, divorce, etc.

HOPE your modification will be a success story, one you can share with the world.

-----------------------------------------
Remember The GOLDEN Rule:  It is NOT about where you live, It’s about how you live. Be sure to do unto others as you would have them do unto you. Behave toward others as you would like to have them behave toward you! JAH Guide!

[Anonymous]

HR5743: Mortgage Modification's Get Out of Jail Free Card for Credit Scores

ACCORDING to an article by CHRISTINE RICCIARDI: 

Individuals going through mortgage modification may soon receive a bit of padding during the process.  That is, if U.S. Representative Jackie Speier (D-Calif.) has anything to do with it.  She is proposing a new bill to Congress that would shield a homeowner's credit score from an adverse rating after the mortgage has been modified.

Under HR5743, more commonly known as the Protecting Homeowners' Credit History Act, on-time modified loans would not be considered delinquent by the mortgage servicer and knowledge of these payments would not be reported by credit bureaus in rating evaluations.

Speier said that she has seen drops as much as 100 points on an individual credit rating while lenders are having mortgages renegotiated, a stab that can prevent car, home and life insurance loan approval.  She believes that is unfair.

"Homeowners shouldn't have their credit scores damaged for doing the right thing," Speier said.

How the bill would be interpreted is unclear.  Credit scores in mortgage finance are generally proposed on two different rating systems: FICO, which rates a person's credit from 300-850, and VantageScore, which uses a range of 501-900; both based in various standards and evaluation criteria.  The Protecting Homeowners' Credit History Act does not specify which one, or both, it will protect.

Not all are on board with this bill.  After all, say some like Joseph Pigg, VP and senior council of the American Bankers Association, where's the accountability?

"To deny information on modifications being used in credit scores only harms the ability of lenders to evaluate the creditworthiness of borrowers in the future, making it harder to determine a borrower's ability to repay any future loan," Pigg said to the Chicago Tribune.

According to research by FICO released this month, about 25.5% of Americans have credit scores below 599.

[Anonymous]

Well....I am happy to announce, that I finally got Bank of America to change the entry on my credit report. I got a letter confirming the change. Now, I just have to wait.  It took going into a local branch. I was very polite with the branch manager and associate who helped me. Once they understood my situation, they immediately started making calls and following up with me daily. Once they got involved, I got constant communication from their so called "customer service".  The person in the "Home Retention" department must love me know. Becuase the branch manager sent emails and followed up daily.  Also, I saw the string of emails the branch manager was sending on my behalf, and it wasn't pretty. She was chewing this guy's butt completely off. He actually sent me an email which started, "Please accept my deepest apologies..." Priceless. It took a while, but it is now resolved. Thanks for everyone on this board. This has definitely help me keep my sanity.