Q: I saw your article from 2009 about people having trouble applying for a loan mod through their lender. My husband and I experienced many of the same frustrating obstacles, but after 9 months, we were finally approved.

Here is the problem: We had consistently asked the lender if applying for a loan modification would impact our credit and we were assured that it would not.

About 6 months into our trial loan modification period, there was a vague statement amongst much paperwork that stated “the bank may report your loan as delinquent even if you pay on time.”

This, of course, seemed illogical. The credit report did report us as 120 days past due, which we fought and won.

And guess what? It’s not over. Now the credit reports each feature a comment stating that the loan was modified through a government plan. This statement cannot be removed despite our best efforts and it serves as a huge red flag and reason for rejection from any lender in the future.

Had we known the loan modification would cause permanent damage to our financial future, we would have reconsidered applying.

Perhaps we would have sold our home instead or just scrapped the barrel to keep our heads above water.

Have you heard of anyone else experiencing this? It seems to be a shame, considering that homeowners seek out this option to avoid such consequences. Our next step may be to contact an attorney to see if we can have that comment removed. Oddly enough, our credit reports are great!

A: One of the great myths that was perpetrated through the housing crisis was that if you got a loan mod, your credit wouldn’t be impacted. As more homeowners went into trial loan modifications and started noticing that their credit reports were damaged and their credit scores tanked, word came down from the folks who run HAMP that if you were on time when you went into a trial loan modification, you were supposed to be reported as on time, even though you were paying less. If you were late going into a trial loan modification, you’d be reported as late.

This turned out not to be true and millions of homeowners have had their credit histories at worst destroyed and, at best, damaged. Like every other part of the loan modification process, how to report customers is at the discretion of the lenders in this truly voluntary program.

At this point, you might want to go online to each of the credit reporting bureaus and write a 100-word statement supporting your side of the story. You can ask that each credit reporting bureau remove this information, but they probably won’t. The fact is, you did go into the program and you did get a permanent loan modification.

Everything else is up to your lender.

I wouldn’t be surprised to see many homeowners band together in some sort of a class action lawsuit once the housing industry recovers somewhat, and fight to have this sort of negative information removed from their credit histories.

I hope this helps and glad you found the post useful.