Unwitting Mortgage Cosigner Takes Hit On Credit Report After Daughter, Son-In-Law Subsequently Modify Loan Payments, Despite Never Being In Default

In Cherry Hill, New Jersey, The Philadelphia Inquirer reports on Roseann Ippoliti, a local woman who recently took a big hit on her credit in connection with a mortgage she had cosigned for her daughter and son-in-law to facilitate a home acquisition, despite the fact that the loan payments were always timely made.

The problem arose from the desire of the daughter and son-in-law to subsequently refinance the mortgage so that they could relieve Roseann from any personal liability on the acquisition loan.

• Rather than leave her in a potentially vulnerable financial situation, Ippoliti said, her son-in-law decided to refinance the mortgage to put the house in his name. He contacted Wachovia and was told to apply for a mortgage modification instead. He did, it was approved, and his payments dropped to $1,100 a month from $2,159.

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• Because Ippoliti's name remained on the modified mortgage, she needed to sign the modification document. But, she said, her son-in-law was told her signature was unnecessary - that his signature, as occupant of the property, was enough.

• In November, Ippoliti received a letter from Bank of America notifying her of a routine periodic review, "to ensure that they feature the most appropriate credit line" on her credit card. That review resulted in a drop in her credit line to $3,400 from $13,000 "because I had a major derogatory record on my credit file," which Bank of America identified as "a mortgage being delinquent." (Ippoliti has mortgages on houses in Cherry Hill and Cape May, and both are current.)

• It was then her daughter and son-in-law told her about the mortgage modification, explaining they didn't do so before because they weren't delinquent and Wachovia said it didn't need her signature. They had no idea how the words mortgage modification are viewed by creditors.

For the story, see Cosigner bitten by refi mistake.