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Follow The Progression: A Call to The Three Credit Repositories

A call to the three credit repositories (if you can get through) will verify the facts in the following scenario... Calls to Master Card and Visa International, though being defensive of their members actions, will confirm them too...

A person, with excellent credit scores in the high "700's", has been advised that his income is about to be cut; and determines to due the prudent thing and prepare for this event. He has mortgage issues and wishes to either refinance or modify the existing loan into lower more manageable terms.. Due to valuation issues, only has the option of loan modification. He then calls the mortgage holder to request relief. The representative the informs the homeowner that because his payment record has been perfect, and that the loan is current; there is nothing that the lender will do until the borrower becomes no less than 60 days delinquent. In real need to address this issue, the homeowner complies with this demand... Sixty days go by and the modification process commences.

In the mean time, this homeowner goes on line to monitor his credit card statements, and make payments. He then notices that his Chase Master Card,, with a current balance of $2,600, has just had his credit limit cut to $2,700. In a phone call to Chase he is informed that a credit report check has shown that the homeowners credit scores have dropped to the point where Chase has deemed him to be a poor credit risk, and that the bank has the right to lower or cancel the account at its sole discretion... He finds similar actions by several additional credit card companies. The person, naively believing that he could "look better" to his credit card holder, he did what he has always done, paid off his balance each month... Upon receiving the payments, most of the credit card issuers, either further reduced credit limits or cancelled these accounts, further compounding his problems.

Now for a bit of insight... in following his mortgage lenders requirement of being delinquent, the homeowner has had his credit scores reduced by no less than 150; and most likely 180 points... The rule of thumb for revolving credit is that the usage must not exceed 75% of the available credit line... Thus, in lowering the credit lines to an amount that is virtually the amount owed causes another huge "hit" to his credit scores. The remark "closed by credit grantor" on the credit report is another such negative impact...

The net result is that a once stellar credit rating has been reduced to the low to mid 500's; a number less than the sub-prime rating even the the FHA accepts!!! Fannie Mae now basically requires a 700 score... Even Fannie Mae HomePath, which is offerings sub-prime versions of the old fashioned, "loans to facilitate" the sale of its REO's will not accept these new credit scores!

Ours is a consumer based economy that requires people to "consume" goods and services... our system also requires some semblance of decent credit...Consumers are being urged to "go out and shop"... yet the system, blessed by Congress is standing the way...In failing to properly address these issues congress has and is continuing to exacerbate the economic crisis...

Stan Brody
United States Mortgage Corporation
d/b/a MULTISOURCE SF Peninsula
http://stanbrody.blogspot.com/