This issue has come up a lot.
The credit treatment is very confusing
Lenders were told by the Consumer Data Industry Association to report payments made through loan modifications from the Home Affordable Modification Program (HAMP) as a partial payment, which could hurt a person's credit score. For some credit scoring agencies, a partial payment can be as bad as a missed payment.
Starting in November, lenders will be able to use a new code that specifies whether a mortgage was modified under the government's plan. But the credit reporting agenies have not decided how to handle the new code.
Other reports say:
Many servicers are reporting the modified mortgages to the credit bureaus as a “rolling 30-day late” while the modification is in its trial period. Homeowners are deemed “delinquent” during the trial period because the modified payment amount is less than the original mortgage payment amount, but the homeowner is not yet officially in the modification program. So, the credit reporting system interprets this as the homeowner’s making a partial mortgage payment each month. Consequently, a new 30-day late is reported each month during the trial period.
How HAMP-Modified Loans SHOULD be Reported During the Trial Period
Borrowers who are current on their mortgage when they enter into the trial modification period should NOT be reported as late, according to servicer guidelines for Fannie Mae, Freddie Mac, as well as other loans (”non-GSE loans”) being modified by HAMP-participating servicers. Homeowners who were delinquent when they entered the modification trial period, however, will continue to be reported as delinquent during the trial period.
Information to Forward to your Servicer if It’s Reporting Incorrectly
If your loan is owned or guaranteed by Fannie Mae, see page 12 of Fannie Mae Servicing Guide Announcement 09-05R for information about credit reporting for HAMP-modified Fannie Mae loans. If your loan is owned or guaranteed by Freddie Mac, see page 5 of Freddie Mac Publication 800 for servicer instructions re: credit reporting of modified loans. If your loan is NOT owned or guaranteed by Fannie Mae or Freddie Mac (a "GSE loan"), see page 22 of “HAMP Servicer Supplemental Directive 09-01 for information about credit reporting guidelines for HAMP modified non-GSE loans.
All three publications state that borrowers who are current when they enter into the trial period and make payments by the 30th day of each month, report as current, but on a modified payment.