Study: Mortgage ‘Mods’ Help Borrowers – With Other Loans
Last week, the Journal’s Jon Hilsenrath wrote about “an economic divide that separates Americans not by income or wealth but by their access to credit.” Because of the housing crash that marred the credit records of millions of homeowners who missed mortgage payments, many Americans are unable to take advantage of low interest rates and the dirt-cheap money being lent by banks as a way of jump-starting the economy.
A study released recently by credit-rating agency TransUnion helps explain the situation. According to TransUnion, borrowers who received mortgage modifications after missing payments are more reliable borrowers in the future — for all types of loans, including credit cards and auto loans — than those who did not receive modification. Modifications can involve reducing interest rates, extending the term of a loan, waiving fees and, more rarely, writing down the principal balance of a loan.