Loan Modification Hell starts with the signing of the trial loan modification papers with a lender.

Q: I just began a loan modification trial period in September for a period of 4 months with a major bank. I am a rule follower, a teacher, and a single mom. I have never been late on a payment, but because of divorce, I filed under a hardship for the Making Home Affordable loan modification program. 

But after reading so many negative scenarios online about the trial modification process, I think I’ve decided not to go ahead with the program. I’m worried that my decent credit will be ruined. I will most likely sell the house. 

It kills me that these banks think they are making money by kicking the can down the road, and dragging out this process. In my situation, once I sell the house, they have lost an account and a customer.

And based on my bank’s reputation, I will never return as a customer. I will only deal with smaller, local banks in the future – somewhere I can walk into their office, shake their hand and look them in the eye.

A: Once you begin a loan modification trial period, and start sending in payments that are less than what you would normally pay, it can immediately affect your credit. It’s a little late now if you have signed the papers for the trial loan modification.

You should think about what you really want to do with regard to the program, but do it quickly. There are people for whom a trial modification works out. But, they are in the minority. The folks for whom it doesn’t work out write to me for help.

Think about what you’re trying to accomplish. I’m sure you decided to go into a trial loan modification because you were having trouble making your payments and wanted to keep your house. If that’s the case, you may have made a smart move.

If you are underwater with your mortgage (where the house is worth less than the loan balance) and instead try to do a short sale (where you sell your home for less than you owe) and you don’t have the cash to make up the difference to the lender at the closing, you will also hurt your credit. Figuring out what will hurt your credit less is important, but so is coming up with a solution that will get you and your family where you want to go.

When it comes to getting angry at your bank, we hear you. There are millions of Americans whose level of trust in the financial system has been severely impacted by the Great Recession. For the most part, we still don’t think the banks get how serious and long-term a problem this is.

You can check to see if your lender is reporting your payments negatively under your trial loan modification by obtaining a copy of your credit history from You can obtain a free copy of your credit report there from each of the three major credit reporting bureaus and you can obtain a copy of your credit score for about nine dollars.

Once you have that information, you might decide to stick it out and see where things go with the trial loan modification. Make sure you don’t spend any savings that you have obtained during the trial loan modifications. It’s not unusual to fail to get a permanent loan modification and have the lender demand payment for the amounts you didn’t pay during the trial loan modification.

Thanks for writing.