What are the credit impacts of a "mortgage settlement" and should I accept the FHA refinance loan?
I purchased my home for 429k, prior to the market downfall. My interest rate is a 5.75% fixed for 10 years, interest only. I recently received an offer from my mortgage company to refinance this loan through an FHA Refinance loan. The bank is willing to reduce the principal to 235K, give me a 30 yr fix @ 6%. This sounds really enticing to me, but I worry that it will affect my credit. I have excellent credit, and the bank states that the "settlement" will have negative ramifications on my credit. Should I accept the FHA loan, and suffer the unknown credit consequences?
I meant to say "not show as negative" ....correction.
I think you are getting a very good deal and suggest that you accept it.
If the bank offers to lower your balance for a refinance it should show on credit as a negative item. Tell them the only way you will agree is if they dont report it as "settled for less than amount due"
In any event, shaving 200k from your mortgage is well worth any short lived credit ding.....well worth it. If anything it would simply look like small ding anyway, as long as you never miss any payments your credit rating would still be plenty high,
I just did the same thing for a client and I dont believe the bank is reporting any negative.
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