Mortgage assistance that comes with a surprise--and it's not a pleasant one

Consumers think they are acting responsibly when they seek out loan help--especially when it is the government that is offering the assistance.  However, for many consumers, acting responsibly these days is beginning to feel like lying down on the ground so others can walk all over them.  Good honest citizens who choose to play by the rules and pay their bills on time are getting hit with another unsuspected penalty, one that may follow them for many years.

If you are one of the hundreds of thousands of homeowners who have been paying your bills on time but decided to take advantage of President Obama's "Making Home Affordable" program, watch out.  You might think that reaching the "American Dream" had become a bit easier, but you have another thought coming, one that might cause you to reconsider this move.

You see, the very moment that your mortgage company or bank informs the credit bureaus that you have applied for this program, your life begins to change for the worse.  First, your credit score drops considerably--about 100 points!  And the impact may be worse for borrowers who enroll in the program and are then deemed ineligible.

That doesn't seem fair (or wise), given that the goal of this program is to help homeowners.   Consumers' credit ratings continue to take unfair hits caused by the actions of others.  Cutting credit limits, closing or significantly reducing home equity lines, and 30 percent interest rates all have significant effects on a consumer's ability to bounce back from a financial shortfall.  As Tom Quinn, the Vice President of Fair Isaac Corporation--the company that issues our three-digit credit rating--put it: "The best way to build credit back is to continue to pay bills as agreed, to use credit wisely. As time goes on, the score gradually increases."

Sounds like someone should take a look at how to put the "fair" back in Fair Isaac's scoring models.

Tens of thousands of homeowners across this nation have spent hundreds of hours dealing with mortgage servicers who have little incentive to actually help them achieve permanent loan modifications.  While in the process of obtaining a modification, many homeowners have been lied to, misled, foreclosed upon or threatened with foreclosure, all further harming their credit scores.  Isn't the road to economic recovery supposed to avoid suspended credit, closed home equity loans and ruined credit ratings?

What is the average consumer supposed to do when even the government's advice leads to taking a further hit on a credit score?

With yet another drop in your score and the fact--it's on the record--that you have applied for loan modification, you aren't going to be getting any new credit for awhile, at least not until you get that credit score back up.  It isn't easy for consumers to increase their credit scores these days, especially when being hit from all angles.

Many homeowners have been making their payments on time, despite having to navigate unfair lender practices.  Then there's no money left for anything else.  They are simply looking for that breathe-easier life that the "Making Home Affordable" program is supposed to provide.  But many will learn they ended up further harming their credit rating. Doesn't anyone in the credit industry understand that shutting off available credit, closing or slashing equity lines and ruining credit scores--without cause or justification--hurts us all? If consumers had a little money in their pockets it might help ignite the economy.

See: Whistle-blowering bank exec confirms homeowners get the run-around.

Here's a brief excerpt from the video where a Vice President of one of our nation's largest banks talks to ABC News and anonymously validates what consumers have been saying  all along: nobody is helping them!

"I'm in the middle of the disaster and nobody is listening at the top. Nobody is listening to the customer..."

"The banker described homeowners pleading to him for help, but he said his bank is not interested in modifying mortgages, even after taxpayers helped bail out the nation's biggest banks. It's just not happening," said the banker.