(From SFGATE.com)

Struggling homeowners who get loan modifications to stave off foreclosure often discover that their credit score takes a big hit.

A bill introduced on Thursday by U.S. Rep. Jackie Speier, D-Hillsborough, would shield homeowner credit ratings after a loan modification.

“To play by the rules, modify your loan and then have it as a blemish on your credit report is just flabbergasting; it adds insult to injury,” said Speier. “The credit system should not punish responsible homeowners who modify their mortgage payments to keep their homes.”

She said she first learned of the issue through articles in The Chronicle that detailed how some homeowners who made on-time modified payments approved by their servicers were being reported to credit bureaus as making partial payments, taking as much as 100 points off their credit score.

HR5743, the Protecting Homeowners’ Credit History Act, would bar banks and servicers from reporting on-time modified loan payments as delinquent and would prevent credit reporting bureaus from including this information in credit reports