Citimortgage's unsolicited offer - partially modified payment agreement - what's its impact on FICO?

[Anonymous]

First time poster.

Citimortgage recently sent an unsolicited offer to us.  Keep our 3.x% 5/1 ARM fixed at the same rate for the next 30 years with no fees, no extra down payment etc.  The only catch is they would report to the 3 credit bureau the following comment "partially modified payment agreement". Does anyone know what negative impact it woudl have on our FICO score?

We are not delinquent and don't have trouble paying our mortgage. Not sure why Citi made us this offer but it seems too good to pass. Just want to know the potential negative impact.

Thanks.

[MarineVietVet]

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@Anonymous wrote:

First time poster.

Citimortgage recently sent an unsolicited offer to us.  Keep our 3.x% 5/1 ARM fixed at the same rate for the next 30 years with no fees, no extra down payment etc.  The only catch is they would report to the 3 credit bureau the following comment "partially modified payment agreement". Does anyone know what negative impact it woudl have on our FICO score?

We are not delinquent and don't have trouble paying our mortgage. Not sure why Citi made us this offer but it seems too good to pass. Just want to know the potential negative impact.

Thanks.

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Hello and welcome to the forums.

Unfortunately, even if you pay 100% on time under a loan mod agreement, they'll mark you late every month if you pay less than what your original loan agreement stated.

This is not something you want to do.

From a BK years ago to:
EX - 9/09 pulled by lender 802, EQ - 10/10-813, TU - 10/10-774

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

[JM-AM]

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@MarineVietVet wrote:

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@Anonymous wrote:

First time poster.

Citimortgage recently sent an unsolicited offer to us.  Keep our 3.x% 5/1 ARM fixed at the same rate for the next 30 years with no fees, no extra down payment etc.  The only catch is they would report to the 3 credit bureau the following comment "partially modified payment agreement". Does anyone know what negative impact it woudl have on our FICO score?

We are not delinquent and don't have trouble paying our mortgage. Not sure why Citi made us this offer but it seems too good to pass. Just want to know the potential negative impact.

Thanks.

---

Hello and welcome to the forums.

Unfortunately, even if you pay 100% on time under a loan mod agreement, they'll mark you late every month if you pay less than what your original loan agreement stated.

This is not something you want to do.

From a BK years ago to:
EX - 9/09 pulled by lender 802, EQ - 10/10-813, TU - 10/10-774

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

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Would they be changing their original loan agreement since the original was for the 3.x% on the 5/1 arm? 

[MarineVietVet]

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@JM-AM wrote:

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Would they be changing their original loan agreement since the original was for the 3.x% on the 5/1 arm? 

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I could be wrong (It won't be the first or last time) and will wait for others to jump in here but no matter what else is changed in the terms the notation "partially modified payment agreement" will be a negative going forward.

How sure am I? Let's just say I've been much, much more confident in other things I've said. 

From a BK years ago to:
EX - 9/09 pulled by lender 802, EQ - 10/10-813, TU - 10/10-774

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

[JM-AM]

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@MarineVietVet wrote:

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@JM-AM wrote:

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Would they be changing their original loan agreement since the original was for the 3.x% on the 5/1 arm? 

---

I could be wrong (It won't be the first or last time) and will wait for others to jump in here but no matter what else is changed in the terms the notation "partially modified payment agreement" will be a negative going forward.

How sure am I? Let's just say I've been much, much more confident in other things I've said. 

From a BK years ago to:
EX - 9/09 pulled by lender 802, EQ - 10/10-813, TU - 10/10-774

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

---

I am in the same boat as you but that makes us human.

I am in agreement the notation couldn't be a good thing, just wondering if it would only be negative on a manual review. If they have a 5/1 arm at 3.x % that is the rate of the loan for the 5 year period and can be adjusted afterwards. If they aren't at the 5 year mark there is no adjustment to be made. 

[Anonymous]

Thanks for all the replies. I just talked to Citimortgage again. Here's why they offered the deal to us:

1 - I live in California, one of the 5-7 states where property prices have declined / are declining

2 - I'm an existing Citimortgage customer

3 - I'm current on mortgage payment (no delinquency)

They are offering this deal (same low interest rate of my 5/1 ARM but extended for 30 years) to make it easier for me to pay.  They will report to credit bureau - "account in current status and under loan modification'.   It contradicts what another Citi associate told me - "partially modified payment agreement".  I will be calling them again to confirm and perhaps send them a letter so I can get a confirmation.

I then emailed myfico.com and got the following reply - "When an account has a description other than "paid as agreed," it is considered by the FICO score as a negative or derogatory description. These descriptions typically have a negative impact on the score."

Here's what I plan to do. Let me know if you think it makes sense.

1 - Continue to talk to Citi to try to get the exact wording of the reporting

2 - Talk to all 3 credit bureaus as well as FICO on how the wording will impact my score

3 - If I do take the offer, make sure that i pay the same amount I'm paying today (maybe pay a little more just in case) even though the new payment is lower per month. I believe this will keep me away from the problem of them reporting to the credit bureau that I'm only making "partial payment" under the old loan terms. While I know the new loan terms is lower, you can't just assume Citi's employees will figure that out and do the right thing.

Thanks.

[Lel]

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@Anonymous wrote:

Thanks for all the replies. I just talked to Citimortgage again. Here's why they offered the deal to us:

1 - I live in California, one of the 5-7 states where property prices have declined / are declining

2 - I'm an existing Citimortgage customer

3 - I'm current on mortgage payment (no delinquency)

They are offering this deal (same low interest rate of my 5/1 ARM but extended for 30 years) to make it easier for me to pay.  They will report to credit bureau - "account in current status and under loan modification'.   It contradicts what another Citi associate told me - "partially modified payment agreement".  I will be calling them again to confirm and perhaps send them a letter so I can get a confirmation.

I then emailed myfico.com and got the following reply - "When an account has a description other than "paid as agreed," it is considered by the FICO score as a negative or derogatory description. These descriptions typically have a negative impact on the score."

Here's what I plan to do. Let me know if you think it makes sense.

1 - Continue to talk to Citi to try to get the exact wording of the reporting

2 - Talk to all 3 credit bureaus as well as FICO on how the wording will impact my score

3 - If I do take the offer, make sure that i pay the same amount I'm paying today (maybe pay a little more just in case) even though the new payment is lower per month. I believe this will keep me away from the problem of them reporting to the credit bureau that I'm only making "partial payment" under the old loan terms. While I know the new loan terms is lower, you can't just assume Citi's employees will figure that out and do the right thing.

Thanks.

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Even if you do this, it will not change the reporting on your mortgage, and you could see a significant drop in your credit scores.  You will notice that the wording of the notation doesn't say anything about whether you are paying less than your original scheduled amount.  It just says that you are paying as agreed under a modified loan agreement.  This comment (which I've seen elsewhere as "Paying as agreed under a partial or modified payment plan") has negative effects on score in and of itself, irrespective of the amount that you might actually be paying.

Having said all that, you may want to consider your long-term plans for your current home.  If you do not expect to stay in your home for more than a 5 or 6 years (yes, I know that's unpredictable), then it may not be worth the drop in credit score to accept the modification.  Since your rate is already low for the next few years, you really wouldn't save any money if you are planning to move in a few years.

[Actually, I guess you didn't say when you purchased your home, so I don't know when your interest rate will start to reset.]

If, however, this is going to be your home for a long time, then you might want to consider accepting the modification even with its negative effects on FICO.  Eventually, as the economy recovers, interest rates are going to rise.  When your ARM resets in a few years, it will almost certainly reset to a higher rate.  Then it will reset every year, with rates potentially going higher.  True, you may be in a position to do a conventional refinance at that time, but if your property value has suffered and does not recover sufficiently, then refinancing may not be a viable option.  A sub-4% interest rate is nothing short of outstanding, and if you can lock this is for the life of the loan then you're going to potentially save tens of thousands of dollars - maybe into the hundreds of thousands, depending on your loan amount - in future interest payments.  Some people would consider that better than having an excellent FICO score.

Tough decision.  Good luck.

[chasmith]

This could be a case where the economic reality should trump the credit score issue.  We on the boards can't tell you the exact score impact, you might go back to myfico and ask whether the notation would be a major or minor derogatory.  If you don't have other plans to take out debt in the next two years, it might be worth getting to the 30 year rate lock at levels we won't see in our lifetimes once the economy starts recovering.

I would consider going back to Citi and asking why this can't simply be treated as a streamline refinance and reported as "paid as agreed".  I would consider contacting the FDIC, and State Regulators with a complaint if they insist on making a report that is scored as a negative.  I would also write to the CEO of Citibank.  They told you you were selected because you are current, there is no reason for them to insist on this negatively scored reporting.

How is your loan-to-value?  Could you do a normal streamlined refinance with Citi, or a refi to 30 years with another lender?  Perhaps even drop to a 15 yr in a refi?  That's the other piece of the puzzle - the cost of doing a refi elsewhere represents your damages from their insistence on what is arguably misleading reporting.

[Lel]

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@chasmith wrote:

This could be a case where the economic reality should trump the credit score issue.  We on the boards can't tell you the exact score impact, you might go back to myfico and ask whether the notation would be a major or minor derogatory.  If you don't have other plans to take out debt in the next two years, it might be worth getting to the 30 year rate lock at levels we won't see in our lifetimes once the economy starts recovering.

I would consider going back to Citi and asking why this can't simply be treated as a streamline refinance and reported as "paid as agreed".  I would consider contacting the FDIC, and State Regulators with a complaint if they insist on making a report that is scored as a negative.  I would also write to the CEO of Citibank.  They told you you were selected because you are current, there is no reason for them to insist on this negatively scored reporting.

How is your loan-to-value?  Could you do a normal streamlined refinance with Citi, or a refi to 30 years with another lender?  Perhaps even drop to a 15 yr in a refi?  That's the other piece of the puzzle - the cost of doing a refi elsewhere represents your damages from their insistence on what is arguably misleading reporting.

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The experience of most people who have had comments similar to those in question is that it is a major derogatory.  Persons who have had this comment added to their mortgages (referred to as comment code AC from the Consumer Data Information Association guidelines, the trade group that represents the credit reporting agencies) have reported drops in score of 100 points or more.  Obviously, the effect on any one individual's score is going to vary, but the risk of a serious drop is there.

Backtracking a bit on what I said earlier, another thing that needs to be considered here is the implications not just for credit score, but for other credit accounts as well (as chasmith alluded to).  Even if you don't intend to apply for new credit anytime soon, the score drop and notation on your credit report could negatively affect your other credit accounts.  Credit limits could be cut, lines of credit could be closed, for example, both of which will exert further negative effects on your score.

[Anonymous]

Again, thanks for all your comments.

Just talked to TransUnion. They said that the most important thing is how Citi categorizes the account status update.

a) If they put it in "satisfactory", then it's not regarded as a negative remark, regardless of the text (loan modification or partially modified payment agreement).But they still can't tell me whether it will have a positive or negative impact on my score. Chances are it will be neutral.

b) If they put it in "adverse", then it's a negative and the text will determine how big the negative impact will be. They also can't tell me how big the impact on my score would be.

Just talked to Citimortgage (again!!!). They said the exact update would be:

"CO: Loan Modified" (CO stands for current, good standing)

They said it's a neutral code (not positive or negative) that should NOT have a positive or negative impact on my score.

Need to verify with Transunion, Equifax and Experian again whether there's scuh a neutral code...