I have been receiving numerous phone calls and emails asking if a Loan Modification will affect your credit. With so many inquiries on this topic, I am assuming there are others that would like to know the answer to this question. Loan Modifications do not affect your credit.
If you are current in your mortgage payments, a Loan Modification will not affect your credit. A loan modification is simply a re-negotiation of the terms of your mortgage with your current lender or lenders. Whether it is a reduced interest rate, longer term, forbearance or a principal reduction, the main objective of a loan modification is to create an affordable mortgage payment that works for the borrower’s current financial scenario. A loan modification is a contractual agreement to change the terms of the existing mortgage, and because there is no effect on the timing or non-payment of the loan, the credit reporting agencies simply do not see the changes, much less report on them.
If you are currently behind more than 30 days on your mortgage payment, chances are your Lender has already reported you to the credit agencies and your score now reflects a derogatory item. Completing a Loan Modification might actually help you become current with your mortgage payments and place you in a payment that you can actually afford. Bringing your mortgage payment current as quickly as possible will minimize the damage to your credit.
Establishing a timely mortgage payment history may actually help improve credit scores, especially if it makes things easier to pay other monthly credit obligations.
If you think a Loan Modification might work for you, I highly recommend having an Attorney with the Paladin Legal Advocacy Center represent you. Call today to make an appointment for a free consultation at 702.376.0088 or you can attend one of their free Loan Modification Seminars held every Wednesday at 6 pm.
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The only crappy part here is that most banks won’t negotiate until you are 90 days late so harming your credit is inevitable. I have however seen some banks recently modify current loans which is nice. Seems like they are willing to work with the good borrowers also, possibly an affect from the bailout funds.
Homeowners who are current on their payments and are represented by experienced real estate attorneys are REGULARLY getting their loans modified from nearly every lender other than Countrywide (who continue to require that good people damage their credit before getting attention). This myth about only delinquent borrowers may have been true at one time, many months ago, but it is certainly not true now. Far more important than a current/delinquent status is the borrower’s ability to demonstrate a legitimate hardship causing the need for reduced monthly payments as well as proving their ability to afford the reduced mortgage payments going forward.