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FHA & Collections - new official policy effective 7/1/12 (JULY, not APRIL) - UPDATED

Established Contributor

Re: FHA & Collections - new official policy effective 4/1/12

Will accounts marked  "legally paid in full for less then full balance" be ok?

Too many to list..
Message 21 of 51
New Contributor

Re: FHA & Collections - new official policy effective 4/1/12

Yes,  they basically just want to see in general at least 3 positive tradelines that are 12months+,  active ones are best, but if you had an auto/personal loan, or even a closed card that ended with a positive history.  Basically you just need proof you are capable of managing your finances and paying your bills on time, and you need evidence to document this.  Fha has its guidelines,  the banks/underwriters have theirs, and the people buying the loans on the secondary market have theirs, which can be modified by investors sometimes.  So while FHA has relatively loose guidelines, if a bank can't sell your loan they are not going to fund it.  I hope that they try to start betting against the sub-prime homebuyers again, so they start buying junk mortgages again, that way I can get a loan easily, but I will not default.  ^^

Message 22 of 51
New Contributor

Re: FHA & Collections - new official policy effective 4/1/12

Fot1, yes that would be ok, as long as its not reporting a balance.  They just are taking issue with the balance remaining with this change.  Now for your overall credit picture and creditworthiness, that will be factored in to some digree, all depending on how old the debt is, how much it was, and the circumstances that caused the default, and your credit picture since.

Message 23 of 51
New Contributor

Re: FHA & Collections - new official policy effective 4/1/12

Some more insight, to a question in this thread I asked previously; as answered by ShanetheMortgageman:

 

"While FHA will allow an authorized user trade line, there are some lenders which have overlays that won't accept them for use as re-established credit, so I wouldn't count on it but it wouldn't hurt to be added and try for a pre-approval if you have no other options.  If you can be added as a joint user that would be best of course.

 

You are correct that FHA won't allow the use of non-traditional trade lines to rebuild credit after a major derogatory event.  If there are derogs within 12 months FHA usually won't approve either, unless it was an isolated event.

 

Underwriter's only review the DOFD not the DOLA, although DOLA will impact credit scores from what I've seen.  On collection accounts it is when the account was sent to collection though, not when the original debt first went late.  So if you have an account that was sent to collections on 8/11 from a debt in 2010 it doesn't matter, the 8/11 date is what the underwriter cares about and you'd need to wait until 8/12 to apply... or get the collection removed somehow.  If it is being sold from one collection agency to another, then if it can be proved it was the same debt as a prior $0 collection on your credit report, then the underwriter would go by the original date it was sent to collections, not the new date it was sent to the 2nd collection agency, etc.

 

-Shane"

Message 24 of 51
New Contributor

Re: FHA & Collections - new official policy effective 4/1/12

I would like to buy my first home this year with an FHA loan. My score is currently a 603 with 65% utilization on credit cards. I was at 632 but score dropped 29 points when an old baddie aged off my report this month. Still, the FICO score simulator estimates I will be back up to a 673-713 if I pay these cards off over 3 months, which I can easily do (have the money in the bank now). I currently have several accounts in good standing including a couple store cards that I paid off over a year ago, 3 major cards ill be paying off (per above) in the next 3 months, and an auto loan that is a year old. I've paid off two other auto loans in the last six years that also show good history. As far as baddies go, I have a paid medical judgement for $271 that is 4 years old (found out about this after the judgement was made, never got a bill) and two medical collections accounts placed with a local CA for $250 each with the same acct. number. The "date assigned" on these $250 CAs is Aug. 2009 and I think they may be duplicates, but I am not sure since I also didn't know about them until I signed up for myFICO last week. At this point, I'm afraid to dispute or question these until I speak to a lender. Another surprise I found is that I am also listed as the AU on my mom's defaulted Macy's account. It shows not in Collections but is listed on the accounts section of EQ as a CO/bad debt with past due balance of $354 from Dec. 2010. My mom has major medical issues that have made her unable to handle her own finances and I did not know the acct had a balance when I took over paying her bills a few years ago...hence why it wasn't paid. In any event, paying these medical and Macy's accounts off is no problem...I have the money...but I know from scouring the forums that I am supposed to wait and see what the lender/UW says when and IF I ever get the nerve to finally apply. Smiley Sad What I WAS aware of, and what has me most worried, is an old $3,xxx CO with Chase (formerly Providian) that goes back years and years. I thought DOFD was 2005 or 2006, and that it would fall off soon, but it looks like the account shows payments made in early 2007, which I know is inaccurate. Is it likely I will have to pay this off with the new FHA guidelines going into effect April 1? If so, I will need to postpone my plans a few additional months to save the cash to pay this off, too. Also, what's the likelihood I'll need to show 2 months reserves? My income is approximately $95k and I want to borrow the max of $271k. My only outstanding debt when I apply will be a car payment of $740.
Message 25 of 51
New Contributor

Re: FHA & Collections - new official policy effective 4/1/12


FICOisa4letterword wrote:
I would like to buy my first home this year with an FHA loan. My score is currently a 603 with 65% utilization on credit cards. I was at 632 but score dropped 29 points when an old baddie aged off my report this month. Still, the FICO score simulator estimates I will be back up to a 673-713 if I pay these cards off over 3 months, which I can easily do (have the money in the bank now). I currently have several accounts in good standing including a couple store cards that I paid off over a year ago, 3 major cards ill be paying off (per above) in the next 3 months, and an auto loan that is a year old. I've paid off two other auto loans in the last six years that also show good history. As far as baddies go, I have a paid medical judgement for $271 that is 4 years old (found out about this after the judgement was made, never got a bill) and two medical collections accounts placed with a local CA for $250 each with the same acct. number. The "date assigned" on these $250 CAs is Aug. 2009 and I think they may be duplicates, but I am not sure since I also didn't know about them until I signed up for myFICO last week. At this point, I'm afraid to dispute or question these until I speak to a lender. Another surprise I found is that I am also listed as the AU on my mom's defaulted Macy's account. It shows not in Collections but is listed on the accounts section of EQ as a CO/bad debt with past due balance of $354 from Dec. 2010. My mom has major medical issues that have made her unable to handle her own finances and I did not know the acct had a balance when I took over paying her bills a few years ago...hence why it wasn't paid. In any event, paying these medical and Macy's accounts off is no problem...I have the money...but I know from scouring the forums that I am supposed to wait and see what the lender/UW says when and IF I ever get the nerve to finally apply. Smiley Sad What I WAS aware of, and what has me most worried, is an old $3,xxx CO with Chase (formerly Providian) that goes back years and years. I thought DOFD was 2005 or 2006, and that it would fall off soon, but it looks like the account shows payments made in early 2007, which I know is inaccurate. Is it likely I will have to pay this off with the new FHA guidelines going into effect April 1? If so, I will need to postpone my plans a few additional months to save the cash to pay this off, too. Also, what's the likelihood I'll need to show 2 months reserves? My income is approximately $95k and I want to borrow the max of $271k. My only outstanding debt when I apply will be a car payment of $740.


Yeah they are going to want you to pay/settle everything.  Or reach some kind of payment plan and have 3 monhs of payments reported on time(not reccomended).  I would verify/validate questionable debts with the CRA's/CA's non-medical's only.

 

Start the HIPPA process with the medical's, and try to negotiate PFD on all you can for the stubborn ones that are left after that(Talk to, email, mail as many people as you can stand all you have to do is find 1 person to say yes and get the offer in writing, settle the ones you can't negotiate PFD  in-writing for, then try to GW off the ones you settle when their status is updated(negotiate a PIF status or 'Paid' status if they won't go for full delete).

Also I would dispute the debts you settle/PIF afterwards even if they say they won't PFD, many of the company's have a policy to not respond to no balance accounts disputes/validations, so you know what that means.(deletion! The idea behind that is they have alot of work to do and would rather work on the ones that can actually make them money Smiley Happy  Almost any private for profit company would think the same way if you think about it.

 

But, one way or the other they will all need to be no balance or deleted, since it appears you owe more than the new allowable amount by FHA( Many lenders would have had you do the same with their overlay's, but now it's official).  

You will need to show some reserves, but with your income that will compensate for alot of things.  Your score will be great because that utilization is absolutely killing you, once you pay that down your score will be sitting pretty,  Overall, you look in really good shape dude. Good Luck!

Message 26 of 51
Established Contributor

Re: FHA & Collections - new official policy effective 4/1/12

"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."

 

Ok, now on a previous thread, I was advised that i need to get the word "dispute" off my report, regardless of it was resolved or not. So should i leave them alone?? I have heard that many people lost a significant amount of points when they got the dispute removed (like 50-90 points).  I am coming in around 640-680 i think in most of my scores, and I can't afford losses like that.

 

I have 3 accounts with dispute marks:

Americredit Car Loan- they wrongfully reported me at 30 days late a few times in like 2008, disputed them and they removed them after research (and an ugly phone call on my part), the account was PIF in december 2011 when I totaled the car.

HunterWarfield- collection company from an eviction in jan 2009, paid them and received a PIF letter but they won't delete it. orignally disputed because they wrongfully informed me they would not be reporting to cb.

Citi- had a credit card that was closed by the creditor and pif in spt 2007, tried to dispute to get it removed and failed.

 

should i be worried that any of this will hold up approval of my loan??

 

additonally the eviction is showing as a seperate judgement which was paid to the collection agency but the apartment company won't update the case as paid unless i sue them do so at this point so is that going to be a problem??

 

these new rules came at the worst time. middle of next month was when i was going to apply for my loan..... Smiley Mad

 



 

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Message 27 of 51
Senior Contributor

Re: FHA & Collections - new official policy effective 4/1/12


zedekc wrote:

Yeah this is stupid, I can pay the debt too, but it will jack my score up if I pay them off, so its a catch 22,  You need to not pay them to keep a good enough score to be able to get a loan, but now you must pay the debts off also to get the loan which is going to screw your score so you won't qualify.



NO NO NO.  I paid off 2700 dollars in collections and my score didn't take any hits (Except when I disputed them after payment to get them to show as zero balance, I lost one point somehow....or maybe that 1 point was something else).  It is a rumor that paying collections hurts the score.  The Date of Last Activity, Date Updated, all of that - means nothing.

STARTING: 11/24/10 EQ-584 EXP-648 TU04-595
CLOSED FIRST HOME 8/19/11 EQ-630 EXP-691 TU04-653
CURRENT: EQ-701 EXP-??? TU08-720
Message 28 of 51
Highlighted
New Contributor

Re: FHA & Collections - new official policy effective 4/1/12

That would be really cool

Message 29 of 51
Moderator

Re: FHA & Collections - new official policy effective 4/1/12


chan85 wrote:

"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."

 

Ok, now on a previous thread, I was advised that i need to get the word "dispute" off my report, regardless of it was resolved or not. So should i leave them alone?? I have heard that many people lost a significant amount of points when they got the dispute removed (like 50-90 points).  I am coming in around 640-680 i think in most of my scores, and I can't afford losses like that.

 

I have 3 accounts with dispute marks:

Americredit Car Loan- they wrongfully reported me at 30 days late a few times in like 2008, disputed them and they removed them after research (and an ugly phone call on my part), the account was PIF in december 2011 when I totaled the car.

HunterWarfield- collection company from an eviction in jan 2009, paid them and received a PIF letter but they won't delete it. orignally disputed because they wrongfully informed me they would not be reporting to cb.

Citi- had a credit card that was closed by the creditor and pif in spt 2007, tried to dispute to get it removed and failed.

 

should i be worried that any of this will hold up approval of my loan??

 

additonally the eviction is showing as a separate judgment which was paid to the collection agency but the apartment company won't update the case as paid unless i sue them do so at this point so is that going to be a problem??

 

these new rules came at the worst time. middle of next month was when i was going to apply for my loan..... Smiley Mad

 

 


Yes, the eviction is a problem.

 

Did the CA give you a Satisfaction of Judgment for the paid judgment?

 

 Is the satisfaction recorded in the county where the eviction judgment was recorded?

 

 If you have a Satisfaction and its not recorded, get it recorded right away. 

 

If they never even provided you a Satisfaction - you need to get one from the judgment holder. If the statement above means that the apartment co is the judgment holder and they are not recognizing the payoff to the CA, then this is an issue you need to address right away. Paying the CA does nothing for you without getting a Satisfaction.

Message 30 of 51