Bill would spare credit score in loan modification
If you are lucky enough to get your lender to modify your mortgage, you shouldn’t end up dogged by a miserable credit score. That’s the essence of a bill introduced in Congress by Rep. Jackie Speier, D-Calif. It would insulate people from taking a credit-score hit for going through loan modifications.
Speier is trying to give people a fresh start as they get either a permanent modification that makes monthly payments more affordable, or a temporary modification, which lenders sometimes use before considering permanent relief. “I am seeing people with sterling credit have their scores dinged as much as 100 points,” Speier said.
A 100-point drop is substantial. It can prevent people from getting life insurance, loans on cars or homes, or even a job. For a small business, a credit-score hit can be a death knell as lenders refuse a line of credit essential for operations. “This is a doomed spiral,” Speier noted.
According to the U.S. Department of Housing and Urban Development, the No. 1 reason people are missing home payments is that they have lost a job or had to take a lesser-paying job. About 16 percent of Americans are unemployed or underemployed, and there are five applicants for every job available.
So if a lower credit score keeps people from getting a new job, that’s counterproductive for the person and the economy, Speier said.She added that modifications benefit neighbors and communities because property values remain intact as people stay in homes, make payments and mow lawns.
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As always,
Shawn