California Loans News

The first day of November presents a better outlook for troubled borrowers. This day commenced that lenders would have a new, more benign way to report loan modifications sponsored by the government.” Through the guidelines of the Consumer Data Industry Association, lenders should report the loan modifications as “loan modified under a federal government plan, said spokesperson Norm Magnuson for the said group representing credit bureaus.

“Once there is enough documented performance for people who went through (a federal modification), we will be able to assess the accumulated data to determine how predictive it is. The analysts prefer having at least a year’s worth of performance data before making any changes to its credit-scoring formula,” spokesman Craig Watts for FICO explained.

Magnuson further said that under the association’s guidelines, “If a person is current with his mortgage payments before and during a trial modification period (typically three months), the lender is supposed to report it as current. If the modification is approved after the trial period, the lender adds a comment that it was modified under a federal plan instead of the dreaded partial payment.”

On the other hand, the new designation may still hurt the borrower if FICO decides to treat the modification as a risk factor. But then again, the prospective lender would still see on the applicant’s credit report the worked up loans and then decide for themselves how to treat the information. Magnuson explained that the new guidelines won’t help those whose loans have already been modified, but depending on the lender’s discretion that they could apply the rules retroactively.

JP Morgan Chase & Co. spokesman Tom Kelly said, “We have in the past looked beyond a credit score at someone’s full credit history and we will continue to do that.”

The reporting guidelines are not applicable to loans that have been refinanced, put under forbearance or modified outside government programs. These have another set of reporting guidelines.

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