In a distressing story yesterday, the Asbury Park Press reported:
Some New Jersey homeowners signed up for housing aid to help them get their financial footing after Superstorm Sandy, only to later discover that an overwhelmed program actually may be sinking their credit scores.
Liz Vargo, a 64-year-old retiree in Point Pleasant, Ocean County, enrolled in the Sandy Homeowner and Renter Assistance Program after flooding from the October 2012 storm filled her basement with four feet of water. She racked up a few thousand dollars in credit card debt replacing the uninsured contents of her basement and was planning on using the money she was saving from SHRAP, which was covering her mortgage and utilities, to pay it down when she signed up in January.
It wasn’t long before she started getting calls from her mortgage lender. It turns out her February bill — due on the first of the month — wasn’t paid until Feb. 24. Then March’s payment wasn’t made until April 24 and April’s wasn’t received until May 8. She even got a foreclosure notice as SHRAP failed time and time again to make timely payments.
Mortgages are the type of bill held in the highest regard by lenders, according to Adam Levin, chairman and co-founder of Credit.com and former director of the New Jersey Division of Consumer Affairs. That means a single reported late payment especially can be damaging, resulting in a 25- to 75-point hit to their credit score.
“When the state falls behind, that effectively means you are falling behind,” Levin said. “Then what you’re saying is that although you’re helping me stay in my home, you’re making the rest of my life more expensive.”
