Lenders Are Digging the Hole Deeper
Feldman Law Center
California loan modification attorneys are fighting to protect borrowers’ credit ratings, even as financial institutions are unwittingly doing great damage. As the financial crisis continues, it seems that the list of its financial consequences for borrowers continues to lengthen, including - lingering negative consequences that could affect borrowers long after the current recession has ended. Now, as lenders put new credit restrictions and requirements in place, many Americans are taking another financial hit, one that could potentially prevent them from opening new lines of credit or taking out loans in the future.
Every borrower in the United States has a credit score, a three-digit rating based on factors such as how many lines of credit they have open, their credit limits and payment histories. The most commonly used scoring method is the FICO score, which ranges from 300 (considered poor) to 800 (considered excellent); in this model, borrowers with a rating of 750 or better usually qualify for the lowest interest rates on loans or mortgages.
The actions of lenders and financial institutions throughout the financial crisis have already affected credit scores. Many banks are closing credit accounts or lowering spending limits for borrowers, while some mortgage servicers are reporting loan modifications in a way that creates one more credit problem for homeowners who are struggling to get their financial futures back on track.
The loan modification process, which is often the best option for homeowners hoping to avoid foreclosure, can also adversely affect credit scores if the lender reports the loan modification in a certain fashion. Typically in a loan modification situation, interest rates are lowered temporarily in order to lessen a homeowner’s monthly payments. Under current Credit Data Industry Association rules, a loan modification is reported as “partial payment,” which can seriously damage your credit score. Furthermore, borrowers may never know that their score has been affected until it is too late.
It is often responsible borrowers, those who pay their bills on time and do not go over their limits, who suffer the most from this tactic. For example, Cathey and Glen Hargrove of Tampa, FL., recently applied for a loan modification after Glen lost his job and their household income decreased. They were granted a “trial modification,” by CitiMortgage, and made all of their payments on time. Unfortunately, CitiMortgage reported to credit bureaus that the Hargroves made “partial” and “delinquent” payments, causing their credit score to drop sharply, a fact of which they were not aware until their loan modification was denied.
In the case of the Hargroves, CitiMortgage eventually rectified the reporting error; however, this happy ending is not typical. In a new, unpredictable credit system, your credit score could be in jeopardy even if you have never made a late payment. Our team of skilled California loan modification attorneys can help you with all aspects of the loan modification process, including protecting your credit. We will communicate with mortgage servicers on your behalf to eliminate the possibility of mistakes or misreporting. Why leave your credit score to chance? Call a California loan modification attorney today.
Visit us at http://www.feldmanlawcenter.com or call 800-588-0425.
Legal Disclaimer
The information contained herein is provided for general information and advertising purposes only and is not intended to convey a legal option nor legal advice for any particular case or situation. Nothing in this article shall create an attorney-client relationship. Nothing sent to this law office via e-mail shall constitute an attorney-client relationship. Nothing contained in this article shall be construed to be a guarantee or prediction of result. Prior results are provided for general information purposes only and do not guaranty, warranty or predict a similar outcome with respect to any future matter. Results achieved depend on individual circumstances and not everyone will qualify or be successful in restructuring their mortgage loan.
