Credit scores? You mean that crap that's kept by corporate crooks like Equifax? You mean that fairly modern invention that adds one more thing the not wealthy need to worry about? Screw credit scores and the people that keep them... you know, the same people that do next to nothing to ensure our privacy and then try to extort money for privacy protection? These guys are worse than the mob. Stay clean, don't overextend yourself and ignore these bastards.
If, as the article says, he was told it would not affect his credit score, he has a legitimate beef. Much of the credit mess was escalated with people not being explicitly made aware of what they were getting into. It absolutely should affect his credit score -- but he should be told that before agreeing to it.
Nah actually he's the norm. I work at another Mtg company doing Modifications and there's tons like him who forget the reason they are trying to get Modifications and instead whinge about their credit score. No doubt information to them as to the effect on the credit scores should be clearer but at the same time people should focus on the big picture-getting your Mortgage pymts made more affordable.
A good credit score is only useful for obtaining more debt. If they are on the verge of defaulting on theiir mortgage, the last thing that they need is more loans. I'll take the $565 month in savings instead of getting more debt.
Yeah..I'm with ya on that. I've always had great credit..but I don't worry about my credit score anymore. If I have to buy another house..I'll use a bank that does manual underwriting..you know, they give loans the old fashioned way..by NOT using a credit score. I no longer use credit for anything & won't need it. Not interested in going into debt ever again.
That's its only purpose, but something like 40% of job candidates are screened out due to their credit.
I forgot about that. However, the guy being delinquent on a mortgage and would lower his score also, but the job applicant may need thousands of dollars to catch up on the mortgage arrearage. Customers may be at a higher risk for identity fraud from an employee who needs several thousand dollars get current and make up monthly mortgage shortages. I was surprised that I passed the credit history screening for my current job, because I had a mediocre score around the low 600s due to maxed out credit cards. However, I was current on all my cards and decreasing debt. My interviewer said that HR was probably looking for major things like bankruptcy and foreclosure(delinquent on mortgage). If I had a score in the low 600s with 6 months in late payments of $2k each on my mortgage, there's no chance I would have been hired. Total credit history is just as important as credit score, if not more so.
While going through the mod, he tried to buy a new car to get lower payments. How's that work? Lower your monthly payment by $200, and getting a new car loan for 6 years and $10k larger loan. What if he didn't get the loan mod, he gets a brand card. It's highly unlikely that he does much better than his current 4.7%, when you take into account the tax, title, license, document fees, financing fees. His payments may be smaller slightly if he choose a 72 month term. There is no way he would be saving $565 on his car payment like he would on his mortgage payment. This guy needs a math class, not more debt.
The people who are in need of mortgage modification have usually already taken a hit on their credit. They are facing foreclosure. The calculus becomes simple. Take a hit on your credit and keep your house or take a hit on your credit and lose your house. I was always surprised when I was representing debtors at the number of people that would come in on the eve of foreclosure, with bankruptcy as their only option to stop the sale and a workable plan of reorganization that balked at filing because "I don't want to hurt my credit." People are not very smart. A foreclosure is devastating for your credit score. A bankruptcy hurts, but you keep your house.
That's crazy! Somebody is so afraid of bankruptcy hurting their credit that they would rather lose the house to foreclosure. Where do people get these idea that a $300,000 default and foreclosure is any better for their credit score? Plus, they have lose their home.
It happened more often than you would think. People just don't want to hurt their credit. They hear bankruptcy and think they will never be able to buy anything ever again. The fact is that there is life after bankruptcy. Besides, when you find yourself in foreclosure, it is not exactly the time to be worried about buying more stuff.
New year same gripes.. From the article: [rquoter]To be sure, many people who apply for the president's plan are already delinquent in their mortgage payments, which wrecks their credit backgrounds. And obtaining a trial modification should affect borrowers' scores because it shows they cannot meet their original obligation, experts said. [/rquoter] This should be stunningly obvious to anyone. The choices are go into foreclosure, become delinquent on your mortgage payments or try to keep your house by getting a mortgage modification. All of those will ruin your credit score but in one you get to save your house and save some money on mortgage payments. What strikes me as even more ridiculous about this criticism is that if you are expecting the Obama Admin to have a mortgage modification plan that wouldn't hurt credit scores that would mean even more government intervention. On the other hand if Obama didn't have a mortgage modification program and just let all those people go into foreclosure he would rightly be criticized even more.
One thing that is lost in all of this analysis is that, by all accounts, the HAMP program has been a miserable failure in that so few mods have become permanent. The smart thing to do would be to pass legislation that allows bankruptcy judges to modify the mortgage. It would be much cheaper governmentally than the $75 billion being spent on HAMP. Not only that, the mortgage servicers that serve as trustee for the certificateholders would not worry about fiduciary liability for voluntary modification.
That's a good point and I'm not nearly knowledgeable enough about finance to know why that wasn't considered. That said I doubt that if bankruptcy judges were allowed to modify mortgages that would preserve credit scores.
Unfortunately, there is not much the government can really do to help with this. For most people, if you have a job with adequate income, you can make your mortgage payments; if you do not, you can't. This kind of a program does nothing to change that dynamic. That is why this program has not been successful, and why other similar programs will not be successful either. With regards to passing legislation that allows bankruptcy judges to modify the mortgage, that is a horrible idea. It would undermine our whole system of contract law, and make mortgage financing much more difficult to obtain for anyone but the financially strongest borrowers. Fortunately, the House of Representatives has recently rejected this proposal: [RQUOTER]Mortgage ‘Cram-Down’ Amendment Fails in U.S. House Dec. 11 (Bloomberg) -- The U.S. House rejected a mortgage “cram-down” amendment that would have given federal judges the power to lengthen mortgage terms, cut interest rates and reduce loan balances for homeowners in bankruptcy court. Lawmakers voted 241-188 today against the amendment, which was to be part of broader legislation reining in excessive risk taking on Wall Street. All but four of the Republicans who voted opposed the amendment, pulling with them 71 Democrats to defeat the measure. The cram-down provision was identical to legislation that passed the House in March and then failed in the Senate amid opposition from the banking industry. Banks and broker-dealers told House leaders in a Dec. 8 letter that the legislation would increase bankruptcy filings, lead to abuses of the court system and undermine efforts to stabilize the housing market. Lenders are “gratified that the House saw fit to vote down the bankruptcy cram-down amendment that would have further increased costs for borrowers,” the Washington-based Mortgage Bankers Association, the industry’s largest trade group, said in a statement today. Representative Dan Lungren, a California Republican, said the amendment would increase mortgage insurance premiums for borrowers “and deny help to those we seek to help.” “This is a prime example of good intentions creating bad policy,” he said before the vote. [/RQUOTER]
I agree withMmojoman that bankruptcy cramdowns won't do much compared to HAMP. I have a friend that works as HAMP loan mod processor. Many of the people that don't qualify have only unemployment income. Others qualified and completed the HAMP mod, because their full time job with overtime turned into a part time job. Collection departments have been calling on these newly modded borrowers because of defaults. It turns out that an employer's next cost reduction step after reducing hours is layoffs for many people. They are collecting $300 a week from their unemployment benefits and can barely make the car payment, food, credit cards and utility bills, let alone property taxes and a mortgage. The only way for this fella to afford the mortgage is to turn it into reduce it from $300k to $30k on a $200k property. Then, there are many others that are business owners or self-employed. They do not make enough money to cover their business expenses, a home, car payments, business loans, etc. Their income may have changed from $100k to $20k, or they may be running the business at a loss and defaulting on their business loans.
It is this kind of simplistic analysis that got us into this mess. What I have seen both on the debtor side and now that I represent mortgage servicers is that borrowers were making payments until the interest rate went through the roof. Then the recession hit, and it is a recipe for disaster. Bankruptcy, by its very nature, alters credit contracts. That is its role. That is what bankruptcy does. It does nothing other than to adjust the rights of parties to a credit contract. Your point in regard to contract rights is not compelling given this fact. You do, of course, realize that under current bankruptcy law you can modify the mortgage if it is a rental property rather than the homestead. Also, you can modify the mortgage on the homestead in a Chapter 11 case. So those with true jumbo mortgages (over $1,000,000) can modify their mortgage under existing law. There has been no change to that since the 1994 amendments. This is the constant argument, but I find it to be nothing more than the legal equivalent of the boogey man. Your friend is seeing very different things that I am seeing as an attorney representing these servicers every day. Perhaps the servicer that employs your friend has acquired a very bad portfolio of loans. I have seen that as well.
