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The Irony of Credit Reporting

In today's New York Times, there is a lengthy piece by Peter S. Goodman about the failures of the Obama administration's Making Home Affordable program. 

This article, like many others, focuses on the program's ineffectiveness at keeping people from ultimately losing their homes to foreclosure.  It also talks, as many others have, about the failings of the mortgage servicers who face the monumental task of processing all of these modifications.  And, again, as many others have, it lists complaints from borrowers whose loans are part of the modification process.  

This article had something in it that I haven't seen mentioned before.  One of the complaints it describes is that borrowers who have qualified for reduced payments under a modification program, and make those reduced payments in accordance with the terms of the modification program, are penalized with a derogatory comment to the credit agencies for making only partial payments. 

I find this ironic, and also very telling about the mindset of many borrowers.  They are, in fact, making partial payments.  Why wouldn't that be reported to the credit agencies?  If they can't make the full payments under the terms of the loans they took out, then isn't that something a potential lender should know, and isn't that disclosure the purpose of the credit report?   In fact, when a lender makes a lending decision, and when an investor makes a loan purchase decision, the borrower's credit report is one of the most critically important factors to the decision. 

I am very much in favor of a program that helps people get back on their feet  and stay in their homes.  That's good for the economy, the investor and the borrower.  But I do not see any justification for misrepresenting the facts to the next lender and investor.  Wasn't that at least part of what got us into the mortgage crisis to begin with- people not making full and honest financial disclosure when they took out loans?


loan modification

You know how many instances a day I notice on the media a prediction of what our future economy holds. Even though some predictions turn out to be true, others are false. There are only so many things our economy could do; get worse or improve, in any event, there is not much on the prediction side when you will find only two possibilities and either one is likely to happen. Now our economy is failing so bad that we will all be applying for payday cash advances and starving because of the credit crisis. I have to ask, is that really a prediction, because in my experience that is a mere observation.