FHA..... Disputed Accounts & Collections. UPDATE!!!

[JChouston]

Hello all. I have a collections ( broken lease) from 2008 for $7470 . It's will fall off next year. My fico is 680. 

Will a underwriter stop me from getting approved. My dti ratios is currently 13%. Since that collection and nightmare from 2008, I have zero lates. All credit cards, personal loan and car payments paid on time. Any advice?

[ShanetheMortgageMan]

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@1awesomedude wrote:

Charge off's - new rules state if charge off's are present must use capacity testing.  Nothing in FHA guidelines addresses the statue of limitations.  In California, a charge off cannot be pursued through the court system after 4 years from last payment, so essentially once you are past the 4 year SOL in Ca, if creditors ask for the money, you tell them no way, and they have no recourse but to maybe try again. 

My question is; if the charge off was more than 4 years ago and outside the Ca SOL laws, does the FHA rules apply when there is not risk of a lien against the property?

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Charge-offs are excluded ... the statute of limitations on collections & judgments do not make them exempt from having to be analyzed in the capacity analysis.

[ShanetheMortgageMan]

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@JChouston wrote:

Hello all. I have a collections ( broken lease) from 2008 for $7470 . It's will fall off next year. My fico is 680. 

Will a underwriter stop me from getting approved. My dti ratios is currently 13%. Since that collection and nightmare from 2008, I have zero lates. All credit cards, personal loan and car payments paid on time. Any advice?

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If you are qualifying for FHA financing then the collection will need to be analyzed using the capacity analysis mentioned at http://ficoforums.myfico.com/t5/Mortgage-Loans/FHA-changing-collection-account-judgments-amp-dispute...

If you are qualifying for conventional financing then there isn't any requirement for a capacity analysis.  It'll be up to underwriter's discretion if they want anything to be done with the collection.  The collection is housing related, so that is about as worse of a collection as there could be, but it's also from around 6 years ago so my guess is an underwriter would want a letter of explanation but wouldn't require it to be paid.  Hopefully they don't try to sue you before the statute of limitations runs out.

[JChouston]

Thanks for the reply! I called the apt complex to settle with them directly. They have no record of me ever living there! I asked how is that possible, the manager said they changed computer systems a couple of years ago. I hire Heartlsnd CR to help. They are sending a debt validation letter directly to the complex. I am hopeful I can get this one negative item (huge item) deleted!