South Florida homeowners face damaged credit from home loan modification programs

Homeowners who sign up for the federal government’s mortgage assistance program are getting punished by lower credit scores, MSNBC reported.

Seeking alternatives to mortgage foreclosure, including short sales and loan modifications, will not save your credit scores. Contacting a Miami foreclosure defense attorney is the best strategy to resolving an underwater mortgage or other challenges faced by South Florida homeowners.
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For struggling homeowners who are making their payments but facing default, seeking help through President Obama’s loan modification program can reduce credit scores by as much as 100 points. Such a hit can take a borrower from a credit score of 700 — which is considered average — to below the territory considered sub-prime, which can make it tougher to get a loan and result in higher interest rates and other restrictions.

Housing advocates contend it’s unfair and homeowners are often surprised and disheartened to learn that attempting to avoid a foreclosure can still result in significant damage to a credit rating. While it can be less damaging — a foreclosure will remain on your record for years and can shave 150 points off a credit score, which is graded on a scale from 300 to 850 — there is little practical difference to the immediate damage of a credit score which drops 100 points, versus 150 points.

And for many borrowers, the damage is already done from missed payments as they struggled with an unaffordable or underwater mortgage for months before seeking professional help.

If you have are facing foreclosure in the Miami area or are seeking home-loan modification in South Florida, contact Barakat, Jacobs & Associates for a confidential appointment to discuss your rights. Call (305) 350-5055.