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FHA Updates: New Mortgage Letter Regarding Collections

March 27, 2012

FHA  UPDATES: NEW UPFRONT MIP, NEW RENEWAL   4/1

New Mortgage Letter regarding collections collectively up to 1,000.00

Click on the link below and update yourselves.

Mortgagee Letter 2012-3
http://portal.hud.gov/hudportal/documents/huddoc?id=12-03ml.pdf

Effective for all case numbers assigned on or after April 1, 2012

Collections

If the total outstanding balance of all collection accounts is equal to or greater than $1,000 the borrower must resolve the accounts (e.g. entered into payment arrangements with minimum three months verified payments- paid as agreed) or paid in full at the time of, or prior to closing. Mortgagees must document the case binder showing each account was resolved or paid in full.*

Exception: An exception to the payoff of a court-ordered judgment may be made if the borrower has an agreement with the creditor to make regular and timely payments, and provides documentation indicating that a minimum of three months payments have been made according to the agreement. The monthly payment must be included in the borrower’s debt-to-income ratio.

Examples of acceptable documentation to support the resolution of disputed accounts or the payoff of accounts would be a letter from the creditor outlining the terms of the payment arrangements, or verifying payoff of debt, cancelled check(s), or a supplement to the credit report verifying payoff or payment arrangements.

Note: Paying “down” of balances on disputed accounts and collections to reduce the singular or cumulative balance to below $1,000, is not an acceptable resolution of accounts.

If the total outstanding balance of all collection accounts is less than $1,000, the borrower is not required to pay off the collection accounts as a condition of mortgage approval.

FHA continues to require judgments to be paid off before the mortgage loan is eligible for FHA insurance*

Disputed Accounts

 If the Automated Underwriting System using the TOTAL Mortgage Scorecard rates the mortgage loan application as an Accept, the mortgage application will no longer be referred to a DE underwriter for review due to disputed accounts, as long as these accounts meet both of the following conditions:

The total outstanding balance of all disputed credit accounts or collections are less than $1,000,and

Disputed credit accounts or collections are aged two years from date of last activity as indicated on the most recent credit report.

If the borrower has individual or multiple disputed credit accounts or collections with singular or cumulative balances equal to or greater than $1,000, the accounts must be resolved (e.g. payment arrangements with a minimum three months of verified payments made as agreed) or paid in full, prior to, or at the time of closing.

The lender must obtain documentation supporting the payment arrangements or that the debt has been paid off. The payments arranged for the accounts must be included in the calculation of the borrower’s debt-to-income ratios.

Disputed credit accounts or collections resulting from identity theft, credit card theft, or unauthorized use, etc., will be excluded from the $1,000 limit under the terms shown below. The mortgagee must provide in the case binder, a credit report or letter from the creditor, or other appropriate documentation, to support that the borrower filed an identity theft or police report to dispute the fraudulent charges. Mortgagees must provide documentation in the case binder to show all disputed or collection accounts are resolved, verified as not a debt to the borrower, arrangements made for payment, or paid in full.

 

FOR A FAST PRE-APPROVAL:
http://pmcmortgageloans.com/mortgage_application.php

First, complete a loan application on our website
-Go to http://www.pmcmortgageloans.com
-Click on Apply Now at the top
-Scroll to the middle of the page and Click on 3. Full Application
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