Many homeowners facing foreclosure who sign up for the HAMP foreclosure prevention program are often faced with a lower credit score afterwards. And in many cases the credit score can drop as much as 100 points especially for homeowners who had not become delinquent on their mortgage despite financial difficulties.
To enroll in the Obama administration's $75 billion "Making Home Affordable" program, borrowers enter a trial period in which they make at least three payments. But some are finding out that their credit score takes a dive during this trial phase. It happens once their mortgage company notifies the three big credit bureaus - Experian, Equifax and TransUnion.
And the irony is that many homeowners are rejected for permanent modifications even after they successfully complete the trial period and that hit to their credit score is not reversed. But this is not the only glitch in this failed foreclosure prevention program. As me have mentioned numerous times, only 170, 000 homeowners have received even temporary modifications while many more remain in limbo facing miles of bureaucracy including unreturned phone calls, unanswered letters and lost paperwork. Also, many homeowners facing foreclosure who complete the trial phase of the modification program are often sent into financial turmoil when they are rejected for permanent modification. Many may end up facing foreclosure anyway or if they move quickly enough they may seek bankruptcy protection discharging their unsecured debt and saving their home, not because of but despite of the damage done by the ill-executed government foreclosure prevention program. To avoid the confusion and financial problems that is often caused by this so-called foreclosure prevention program, debtors facing foreclosure should seriously consider if bankruptcy will be a better option.