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After applyining to the Home Affordable plan to decrease the interest rate in our mortgage, we discovered that our credit rating had been adversely impacted although we had not been in default and had been paying according to the pre-approval terms.  We were never told that the sole application for the program and while the evaluation was taking place will be reported as defaulting on the mortgage payment. 

Default on a mortgage backed obligation is seen more severly by financial entities than other type of default; hence, credit limits were decreased and interest rates in non secured obligations and payments of obligations affected by the rating review increased so the effect of the applying to the plan may have brought some relief from the cash flow perspective but the effect was nil when compared to the increase in annual payments in insurance premiums, for instance.

After four weeks of talking to 10 customer service representatives in New Delhi, we were able to talk to someone at the Loss Mitigation department who stated that the mortage company had not made a mistake and that this was just the way it was so we will remain reported as delinquent while the evaluation of the application was taking place.  Despite having applied by mid March, to date we have not received any request for documentation nor have been approached with what needs to be done for our situation to be clarified.  This situation has reminded me that indeed no aid comes ever for free.  I wonder what the small print or the operational hurdles of implementing a health care reform will burden us with....

I am furious!...

I am one of those that is tightening the belt because of the economic downturn.  I am also one of the dreaded 9.5% of jobless Americans, but I still want to think of myself as a reliable individual.  I lost my job through no fault of my own, I have yet made an effort to have no outstanding bills, I am not delinquent on any account, I have paid my taxes and have taken all the measures I can to contend with the challenges of these times.  Part of the strategy was to leave one, just one credit card line available -just in case- 

To my surprise and frustration, my bank (one of those bailed out giants) decided to decrease my credit limit substantially.  Although I have always made the payments on time and have paid about 1000% of the minimum payment each month and although 95% of my credit line was available, the bank decreased the credit line to a ridiculous level:  with the decrease, my annual maintenance fee is 5%  of the overall line!.

I have been a customer of my bank for years. Our deposits have and still exceed -by far- our credit obligations.  I learned about this decrease by serendipity.  Only two weeks after the fact I have received a letter stating that the decision  is due to "serious delinquency" and the time since the delinquency is recent... so either there is a big mistake or I have been a victim of identity theft -just to add to the stress of the overall situation- 

It bothers me that I am seeing as a risk when I have always thought of my banker as a business partner as naive as it seems.  It bothers me even more that this was done ex-parte and I had not recourse before the measure was taken.  I know that I can excercise my rights according to the Fair Credit Reporting Act and to request a copy of the report the decision was based on and allegedly dispute it but as I understand the bank is in no obligation to restitute my line even if I prove the credit agency rating wrong!

I have put together the facts and it is my biggest fear that I am facing negative consequences for applying to the Home Affordability Plan.  I am not implying this is relatiation; however, since I applied to the Plan, my current mortgage lender -who processed my application- has sent me default notices although I have paid before the date due, the amount they instructed to as per the Plan. 

I have contacted my mortgage company (another one of those giants) and they have reassured me that I should not be worried.  They explained that the collection was triggered because since the modification is still under evaluation, I appear as delinquent.  Someone in New Dheli assured me though, that no negative report had been made to the credit agencies but then, how is it that my insurance company increased the premium and my bank decreased my credit limit?

One may say that financial institutions are so large that the quick enactment of the Home Affordability Plan didn't allot time to adjust their systems accordingly.  Sadly, as stakeholder via bailout and as victim of their abuse I have as much sympathy for the banking system as the system has loyalty to its customers.  I find it apalling that we need regulations such as the Credit Card Accountability, Responsibility and Disclosure Act provisions, to curve the greed of the banking sector.  Furthermore, Why do I have to prove my credit worthiness if I have been tainted by the mistake of a financial institution? 

I have to face it and admit it:  the banking sector has robbed my identity and my credit is shattered.  Like every victim of identity theft, the burden to prove that I made no wrong is on me and I have haphazardly entered the vicious circle of credit unworthiness:  My mortgage company may have erroneously reported default, hence my insurance company increased my annual rates (strangling an already precarious budget), then my bank decreased my credit line which affects my rating negatively, this is turn triggers a snowballing effect within the loss mitigation departments of every credit entity and I will be condemned to oblivion! 

The autopsy findings: Financial death caused by full front collision against an apocryphal credit rating.

It is the role of the financial sector to enable economic growth by making financial resources available for investment and consumption or so we were told during the bailout.  From this perspective is our banking system really effective or is our banking system designed only to serve large interests?  Isn't there a profit in volume?  I mean, I understand I may not be at the core of my bank's service but don't we average consumers amount to a considerate portion of the banking profits? 

Perhaps what needs a review is the credit rating system.  In other countries, credit worthiness is assessed in function of cash flow availability and not on the basis of a rating affected by factors that are not related to a customer's ability to pay.  In America our credit rating system rewards people with numerous available credit lines and current obligations.  I was shocked to learn that the President of a succesful venue in my area who was transferred from the parent company in Europe was unable to get a personal credit card without securing it with some balance in a "savings" account. As a newcomer to America he had no credit worthiness because he had no rating despite his ample purchasing power, excellent credit history overseas and very low probability of default.  Yet, I know of someone else whose annual gross income was $45K for a household of 4 people, a subprime mortgage for $270K, and credit card debt for $17K and who was able to get a loan to buy a new car.  Intertesting comparison that calls into question the forecasting ability of credit worthiness of our credit rating system. 

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