Loan modification credit impact
My wife and I just got approved for a loan modification. We were never late on our payment and have great credit, but the property value was way too far underwater to refinance. We were stuck in a 6.25% I/O that was going to switch to an amortizing loan in 3 years. Someone, in a matter of about 10 days, our loan modification file was approved and we've been offered a 3.75% fixed rate amortizing loan for the remainder of the mortgage. No reduction in principal, simply a reduction in interest rate and the switch to amortization. My question is, will this type of loan modification have a negative impact on our credit rating going forward? How is it viewed in the eyes of a lender in 3-5 years, if we decide to make a move? by bruinb_586_274 from Manhattan Beach, California. May 12th 2013
James Mazzola (Mazzola)
#109 ranked lender in New Jersey - 314 contributions
A general loan modification does not effect credit
Joe Metzler (JoeMetzler)
#17 ranked lender in Minnesota - 4,848 contributions
It depends... If you have a loan modification like HAMP, there should be no impact to scores, although the modification is noted on the credit file and lenders will see it. Other programs may be referred to as "loan modification" but could hurt your credit scores because they are actually debt settlement programs. In your particular case, there should be no impact.
Thank you both for your answers. This modification was given under the pretense of hardship, but was not performed under any federal programs (HAMP, HARP, etc). The loan wasn't owned by FNMA or FHLMC, so it didn't qualify. However, we received a response in 7-10 days after submitting our paperwork and we have a 4-5 page document that we need to sign to lower our rate. It all just seems too easy. Would any modification to our credit need to be disclosed on the documents?
Dave Metsker (DaveMetsker)
#35 ranked lender in Oregon - 2,318 contributions
Complete the documents, without change or comment, as long as they meet your needs, which it sounds like they do. Don't worry about your credit score.
Carlos Figueira (carlosfigueira)
#107 ranked lender in New Jersey - 199 contributions
Once your loan mod is completed your credit will reflect up to date.
Carlo Sanchez (MortgageLendingPro)
#0 ranked lender in Utah - 1,163 contributions
You should be ok on later one unless there was a forebearance on any of the balance. If you didn't miss any payments there probably wasn't any forebearance but keep ALL your paperwork and monitor your credit.
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