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Information About Mortgage Modification and Credit

How does a payment plan with a mortgage company reflect on my credit?

I have excellent credit and am six years into a 30 year fixed mortgage. I have never missed nor been late on my payments. I was recently laid off and decided to explore a workable solutions option that my mortgage company was offering. They are offering me an option of reducing my payments by 20% given my payment history and my current financial situation. I asked if this would affect me adversely from my credit rating standpoint. And they said it would only show that I was in a payment plan with my mortgage company. My question: Will this have any adverse affect on my credit score? I ask because I have worked very hard at keeping my credit at a top level and wouldn't want any help that would hurt me. Your response would be greatly appreciated.

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The potential credit impact, if any, depends on whether the reduction is temporary or permanent, is made by reducing interest or principle, and other factors. That said, if modifying enables you to continue your perfect payment record (and your house!), then mortgage modification will be a much better option for maintaining your credit compared to the credit damage caused by missed payments and foreclosure. Just be sure to read and understand your new terms so you're not surprised by hidden fees, penalties, balloon payments, or other things down the road. After all, you don't want to be just "jumping out of the frying pan and into the fire."

I also encourage you to check out the options that will be available come March 4th through the government's new "Homeowner Affordability and Stability Plan." The offer you have been given may be the best one possible for your situation, but it won't hurt to read about the major changes being introduced March 4th by this plan. Generally speaking, it will increase the options for many distressed homeowners. I can't say whether any of them will beat what your mortgage provider has offered, but at the very least, it should help you better understand some of the major changes happening regarding mortgage restructuring. For Q&A regarding many commonly asked questions regarding the "Homeowner Affordability and Stability Plan" visit this link.

Free official summaries, fact sheets, and other publications and resources regarding the "Homeowner Affordability and Stability Plan" are available for free viewing and downloading at: www.financialstability.gov.

I wish you continued success with your perfect payment history and hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill

www.bills.com/

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3 Comments

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  • 35x35
    Apr, 2009
    Nithin
    I doubt that you can qualify considering that you have outstanding debt and a low credit score. Could be possible if you have a large amount of equity in your home.
    0 Votes

  • 35x35
    Apr, 2009
    dee
    My credit score is low and I am behind in my bills. I have a mortgage and wants to get out of debt. Can I qualify for a second mortgage, with a low credit score.
    0 Votes

  • 35x35
    Apr, 2009
    beachdude
    The most common mortgage modifications are listed below: lowering the mortgage interest rate reducing the mortgage principal balance fixing adjustable interest rates within the mortgage increasing the loan term throughout the mortgage forgiveness of payment defaults and fees or any combination of the above.
    0 Votes

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