mortgage loan modification

Anonymous · ‎12-07-2008

does anyone know how a mortgage loan modification would affect my fico scores. i really don't have anymore details about how it will be modified yet. i am not behind on my mortgage payments, but did loose my job due to the economy. it appears that majority of business's and companies around this area are on a hiring freeze. but i am not giving up on finding another job..... things are gonna to alittle tough. however i did call my mortgage company and advised them of the situation and they informed me that there is nothing that they can do for me because i am current on my mortgage, they also informed me NOT to make January's payment due the 1st and to call them on the 2nd and then they could do some type of loan modification. i do believe that it would be in my best interest to take advantage of this, but if it is gonna affect me for seven or so years i may rethink it.......but then again seven or so years is a short time compared to being homeless with a screwed up credit report with a foreclosure. any advice or recommendations would be greatly appreciated.

Lel · ‎12-07-2008

A while back someone mentioned that after his loan modification, there was no negative effect on his scores. I am hoping this to be the case, because I am in the process of going through a loan modification myself.

Like you, I have not missed any mortgage payments. I'm not actually having any financial problems at this time, but I currently have an ARM that can't be refinanced because my combined LTV is too high.

Since I started the loan modification process back in October, I was actually told not to make any payments to my mortgage. My November payment was deducted from my bank account automatically (as had been previously arranged), and my lender actually refunded me the entire payment. On the same day that I received the refund check, I also received a letter saying that I was behind on my mortgage. Go figure. My lender assured me that this was nothing to be concerned about because of the agreement in the works. I have now "missed" my December payment, and yesterday I received a letter that warned me of impending foreclosure if I don't pay up.

These letters, however, are automatically generated in response to late payments. I have been told on at least two occasions that there is a credit freeze on my account, and no late payments will be reported to the CRAs during the modification process. My loan balance when the modification is in place will be higher, because the "missed" November and December payments are going to be included in the new loan, the first payment of which will be due on January 1. Even though these letters are kind of scary, I'm not worried about them since these were the result of direct orders from my lender not to make any payments.

At this point, I am technically over 30 days late on my November mortgage payment, and nothing has been reported to Equifax (Score Watch shows no change in my score or credit profile).

I would not intentionally miss any mortgage payment in order to secure a modification. There is no guarantee that you will be able to get a modification even if you do so. If you are unable to show sufficient income to support a modification, then you might not get it. Also, it's not entirely true that you need to be behind in your mortgage to get a modification. My case illustrates this point. You just need to be a little persistent in your efforts.

Message Edited by Lel on 01-28-2010 01:05 PM

Anonymous · ‎12-07-2008

The onyl thing I would be concerned with is if there are second loans. there are stories floating around of second mortgages gatting cut out and charged off as bad debt to make a modification go through (i think this is in more extreme cases clsoe to foreclosure) and then these charged off debts generating collection calls. I am not sure if these calls are legitmate or not and there has been some questions on whether if the second lien ends up getting nothing, can they charge off the debt and then sell it like a credit card company would?

Other than that concern (and you should be able to address that with your bank) I don't think you will see any negative actions.

Anonymous · ‎12-07-2008

thanks for your replies. however there is a second or HELOC. i am hoping that it won't be affected (wishful thinking???) currently it is at 4.5% with a 36000.00 bal with a limit of 40000.00 not to mature till 2018. i am hoping that the modification would let me skip a few paymemts till i get re-employed, my current mortgage rate is at 6% 30 year fixed which i think is good......i had no problems paying my payment when i was employed. so i don't think a rate reduction would benefit me. so, i will keep my fingers crossed hoping for a couple payments to be deferred and leaving my HELOC alone.....what do ya think the chances of that is?

Anonymous · ‎12-07-2008

Yeah, if you are already at 6% fixed there is nto alot of room for them to do. Maybe they can defer 2-3 payments to give you some breathing room. As far as the HELOC goes, I would think that is OK. I have just seen situations where you have like an 80/20 loan from the same bank and they want to do a modification on the larger loan and write off the smaller laon to avoid foreclosure. the problem with that is some banks have apparently tried to sell off the bad debt like they would a charged of CC to a collection agency. Still better than loosing your home to foreclosure in those cases, but if you are unaware they are doing this (and I am not sure it's legal) and someone starts calling asking for their 50K in debt you "owe" even though you thought it was all settled it could get messy.

Lel · ‎12-07-2008

Pursue the modification. Even with that interest rate, you could actually do better. Again, I can use myself as an example.

First, I have a second loan - a HELOC - with another lender. That's being left alone. It doesn't come into my loan modification equation. The holder of my primary mortgage (the ARM) is aware of this loan. Since I am not in default of either loan and do not require any reduction in principal balance, then it's a non-factor in my case.

Second, my ARM has a current interest rate of 6.50%. I inquired about fixing the rate only for the entire life of the loan - that is, to convert my ARM to a fixed-rate loan at the current balance. I did ask for a modest cut in interest rate. To my surprise, the offer I have received is to drop the interest rate to 3.75% for the next five years, after which it will revert to original rate of 6.50% and will never change for the remainder of the life of the loan.

So, while your 6% fixed is definitely a great rate, if you are persistent in pursuing a modification, you might be able to negotiate a temporary reprieve during these difficult financial times that you are facing.

Good luck!

Anonymous · ‎12-08-2008

wow, you guys have really gave me some good information.....i am going to pursue the loan modification. guess my next question is do i wait till January and not make that payment, like i was informed by the CSR at CW. or can i call back and get the ball rolling imediately. by the way my HELOC is with a local bank, and that is current also.

Lel · ‎12-08-2008

@Anonymous wrote:
wow, you guys have really gave me some good information.....i am going to pursue the loan modification. guess my next question is do i wait till January and not make that payment, like i was informed by the CSR at CW. or can i call back and get the ball rolling imediately. by the way my HELOC is with a local bank, and that is current also.

If you are able to make the payment, then do so. Do not let yourself go into default if you can avoid it. Yes, it is true that the lenders (Countrywide among them) are focusing most of their efforts on those who are already in arrears, but you shouldn't voluntarily fall behind with the hope of securing a loan modification. If a modification can't be negotiated, then you'd be stuck with a late payment or two that will haunt you in the future.

As of December 1, Bank of America has a new plan to help about 400,000 former Countrywide customers who are struggling with their loans. The precise details of the plan are not fully known, but it's out there waiting to happen. Since you are in a fixed-rate loan, have a very good interest rate, and are not delinquent, then you are going to have some difficulty getting someone to consider your request for modification. However, you can make a case based on the fact that you have experienced a drop in income.

Message Edited by Lel on 01-28-2010 01:06 PM

Anonymous · ‎12-08-2008

thanks Lel

you have and everyone else here have been a big help.....i will go over to loansafe and post this also.. thnaks again to everyone.

Message Edited by DaleSC1 on 12-08-2008 02:42 PM

Anonymous · ‎12-08-2008

One thing.

Is your paymetn due on the first, or are you already late.

If the bank is telling you you have to be late a couple days before you can modify then by all means do that and skip the paymnet. Just make sure that you get it in writing from them that the loan is being modified and no collection activity/credit reporting is going to occur.

If they are telling you you need to be 30 days late then you want to be careful. If it doesn't work out with them on the modification then you are behind, owe late fees, and will have a 30 days late on your credit.