Making Home Affordable program puts dent in credit scores

If you accept a modification through Making Home Affordable, you'll probably pay for it with a lower credit score. In some cases the impact could be as much as 100 points. Future borrowing could be compromised, erasing some of the savings from the government bailout. Making Home Affordable targets not just delinquent homeowners but strapped borrowers who have never missed a payment. The goal is to keep house payments no higher than 31 percent of income. Banks usually accomplish that by lowering interest rates below market rate. The government picks up some of the tab. Before Nov. 1, a person participating in a trial loan modification was reported to credit bureaus as a "partial payer." With the Treasury's encouragement, FICO helped create a new credit default category: "Loan Modified Under a Federal Government Program." In doing so, FICO agreed to wait until at least mid 2010 before reconsidering credit scores.

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