President Obama has instituted a mortgage modification program which would help troubled homeowners get out of financial difficulty and possibly avoid bankruptcy proceedings. This program can be a lifesaver for homeowners who are significantly behind in their mortgage payments but there are some hidden consequences of enrolling in the program.
As many people have discovered, this trial mortgage modification program can hold you captive for many months while the loan servicers collect documentation about the homeowner. Once a homeowner is enrolled in the program, the bank is obligated to send information to the credit bureaus, including how far behind the payments are. During the trial the new payments are marked as “partial payments” until the homeowner can prove this new payment plan is viable.
All of this can affect ones credit score in a negative way.
If homeowners are significantly delinquent in their mortgage payments, then this mortgage modification program can help. But if a homeowner is just having a difficult time making ends meet but are NOT delinquent on the mortgage payments, then this program is NOT a good alternative.
If you’re a homeowner who doesn’t want to enroll in this program but is still worried about finances, here’s a creative way to avoid bankruptcy and foreclosure. Sometimes great ideas come when you “think outside the box.”
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