Effects of a mortgage deferrment

[Anonymous]

Hi everyone.  Approx two weeks ago, my husband fell at home and broke his leg.  He is going to be out of work for at least three months.  We were doing pretty well financially (decent for us, but still borderline low-income) at the time of the accident.  In one fell swoop, everything is now on it's ear as he won't have income coming in.

We have a USDA Direct mortgage.  We contacted them to inquire about a deferrment for six months.  Well, as they are only now processing emergency deferrment requests from DECEMBER, we're wondering if we should just try and pay the mortgage and get by.  To complicate matters, USDA told us that they will still report our missed payments as missed. 

AND, USDA retains the right to choose not to continue the loan at the end of the deferrment. 

My question is, what will happen to our credit score if we accept the deferrment and for six months we have these deferred payments reporting to the credit bureaus.  How severe of a hit might we expect?

[Anonymous]

That sounds like a tough situation. Sorry to hear about it.

It sounds like they already plan to beat you up pretty bad until you get to the deferment agreement. I'd give them a call and ask how they handle credit reporting through deferment. I'd just be guessing but I'd imagine they would continue to beat you up.

The 90 day and greater hits are pretty severe on the credit score and diminish slowly. They are weighted heavily.

[RobertEG]

If they grant a deferrment in payments,they are modifying the terms of your contract with them.  During the period of deferrment, they are apparently deferring payments, so you will have no due date upon which to report late payments.  The account will still be "paying as agreed."

The expiration of the deferrment will set a date and amount due.  That will be your next billing statement.  Then their ability to report lates would resume.

They are apparently saying that once the deferrment ends,they will grant no further quarter.

I would do all I could to meet current due dates until you have the deferrment and its terms in your hands.

[Anonymous]

The initial paperwork (application) included mention of the fact that, during deferrment, missed payments would be reported to the credit bureau as late.  It also mentioned that, after the deferrment, if USDA chooses to continue the loan, than the missed payments would be added back in to the loan and our regular monthly payment would increase.  In other words, it's not like they would add those missed payments on to the end of the loan. 

So I called and inquired about all of this and what specific benefit a deferrment would grant me if it took at least two months to grant, the missed payments were added back in (making it harder AFTER the deferrment), it was still reported to the credit bureau as a missed payment and USDA might choose to cancel the loan anyways. 

I spoke with a supervisor after the first level agent was just rude and nasty (really....like I need to deal with a witch during this time).  The supervisor confirmed that yes, indeed, the missed payments during the deferrment would still report to the credit bureaus as missed and that yes, USDA might choose to not continue the loan (though that rarely happens).

Our tax return came in so we do have the money in savings right now to make probably the next three months of payments.  But it will severely deplete our savings and I'm not sure we would have enough to get by with other bills that can't be deferred like utilities.  Food is not a problem, we applied for public assistance (ugh).  But..if my husband has to be out of work for longer than 3 months, than we're going to be in a world of hurt if I can't get this loan deferred in a way that is not going to also destroy our credit.