Bookmark this site
One regular feature in media coverage of the mortgage loan modification process is people who either default or threaten to default, get into a loan modification program, then bellyache that doing so has lowered their credit scores.
Maybe that shouldn’t be surprising in this post-shame age, but as is often the case when you look at the landscape of bad borrowing, the penalties for defaulting are not particularly onerous. In fact, you could make the case that they’re not onerous enough.
Smarter people seeking loan mods are wary, with good reason, of how the process will impact their credit scores. Banks do take note when you try to change to the terms of your mortgage. But the bulk of the credit damage comes when borrowers stop paying in order to get leverage over the bank. The actual damage to the credit score based on the loan mod is modest and often temporary.
Read more from Reason
