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If you are in trouble with your mortgage payment, you may be applauding recent government programs to help you negotiate a loan modification.  You may have already been helped through Making Home Affordable or through a similar program at your bank.  Now with recent program changes that encourage principle reduction and offer help making payments when you are unemployed, you may feel assured that you will make it through a tough time with your home intact.

This is great news, but there is a down side.  In the process of saving your home, you may lower your credit score. Anytime you are delinquent, have your payment adjusted or loan terms adjusted, you take a credit score hit.

Some homeowners who opted into a trial modification under Making Home Affordable are finding this out the hard way.  They make a few payments at the lower amount, only to find out their score has dropped.  Being in the trial program is no assurance they will even be accepted for permanent modification, yet they are penalized about 100 points just for asking for help.

The credit industry is, of course, quick to defend this practice of penalizing those who even ask for a change in loan terms.  The government realizes this is a side effect.  Consumer advocates deplore the practice on the grounds that people should not be zinged for trying to do the right thing.  All of these parties encourage people in trouble to ask for help before their homes go into foreclosure, but the credit score drop is a disincentive to many.

However, for most who seek help, this is an irrelevant side effect, especially if they are already behind on payments and close to losing their home. It’s like telling people on the sinking Titanic that they will be billed more if they chose a red lifeboat instead of a blue one.  If you’re drowning, you might prefer the blue one, however, if the red one is the only one in sight, paying more for red seems pretty reasonable.

Remedies such as loan modification, bankruptcy, and even short sale or foreclosure are last resort remedies that you might choose when you have no other options.  In a perfect world, you would be able to pay your bills without needing help.  In the real world, if you need help, your best option is to use the help accessible to you.  The time to ask is - as soon as you need it.  There may be a credit score impact with any remedy, but the impact is less the earlier you ask.

Express Homebuyers will buy your home for cash.  Call us today at 1-877-804-5252 or check out our helpful website.  We will make you an offer on your first call, provide free reports to help you make your selling decision, and even offer options to chat with one of our helpful consultants.

Every new wave of the Making Home Affordable Program (HAMP), as well as every wave of foreclosures, puts the banks in the spotlight in ways they seldom want to be.  After many banks received TARP bailouts, some have not acted the way many expected them to, whether they got a dime from the Feds or not.Their Slow Response to the Crisis…

HAMP was conceived promptly to meet a crisis, so banks had to prepare to implement it quickly.  Participation in the program was voluntary and even banking giants who had developed their own programs for distressed homeowners did not embrace HAMP immediately.

Though banks have been paid incentives through all phases of HAMP, they have been slow to process modifications; the government has only paid $50 million.  Out of 3-4 million homes that Making Home Affordable hoped to saved, there have been only 170,000 permanent loan modifications so far.

There is lots of red tape involved in modifying a loan, but banks are still not set up to handle the waves of foreclosure, despite increased hiring of processing staff.  As a result, it takes a long time to process the paperwork that is justifiably involved in changing loans.

The Underlying Issues…

Banks may be dragging their feet as they, of course, prefer to have borrowers adhere to original loan terms.  In their defense, the ownership of these loans is complicated.  Many are backed by investors, so multiple investors hold mortgages.  How can these investments be valued?  Who loses what and how much?

Almost immediately, an irony shone through.  HAMP could only be successful if banks were on board, but forcing them to comply was (and is) an issue in itself.  In a free society, can a government force private businesses to rewrite loans and thereby threaten their investors’ pocketbooks?

The current crisis requires that banks pick up the pace in their responses and do so in a way that balances their needs as a business, the concerns of their investors, and the plight of distressed homeowners.  This is a tall order, but one that banks must fill if they ever hope to return to business as usual.

Looking to sell your home?  Express Homebuyers buys homes in DC, Maryland, and Virginia.  Call us today for a fair offer.  We buy homes for cash and you could have $2,500 in your hands even before your deal closes.