California Loans News

Spokesperson Norm Magnuson from the group representing credit bureaus said that the first day of November presents a better outlook for troubled borrowers.  November 1^st was to have a new more benign way to report loan modifications sponsored by the government. Through the guidelines of the Consumer Data Industry Association, lenders are to report the loan modifications as “loan modified under a federal government plan.”

According to Craig Watts from FICO, explained that analysts prefer to have a least a year’s worth of performance data before making any changes to its credit-scoring formula. Once there is sufficient data documented from people who went through a federal modification, they will be able to access the accumulated data and determine how predictive it is.

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

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

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

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

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