Help! LO says FHA Underwriter requires ALL CO's to be paid off

[Anonymous]

Just to clarify... With a FICO of 623 on a self employed loan, I doubt you are going to be able to shop around and find a bank that is willing to overlook 17K in charge offs, especially when it involves a HELOC loan. A 10K heloc that was defaulted on is going to be a bright red flag no matter who sees this file. You may get an LO that gives you the go ahead, but the UW will catch it. It is just too much debt and too risky that any of these companies could file a lawsuit against you. Usually if the total balances are under a grand or two alot of banks will let them go. As far as the Heloc goes, if you sold the house in late 06, it could very well be that 11 07 was when the loan was determined to be in default and offically charged off. In that case, it is still well within SOL for lawsuits I would think.

[Anonymous]

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@Anonymous wrote:
Just to clarify... With a FICO of 623 on a self employed loan, I doubt you are going to be able to shop around and find a bank that is willing to overlook 17K in charge offs, especially when it involves a HELOC loan. A 10K heloc that was defaulted on is going to be a bright red flag no matter who sees this file. You may get an LO that gives you the go ahead, but the UW will catch it. It is just too much debt and too risky that any of these companies could file a lawsuit against you. Usually if the total balances are under a grand or two alot of banks will let them go. As far as the Heloc goes, if you sold the house in late 06, it could very well be that 11 07 was when the loan was determined to be in default and offically charged off. In that case, it is still well within SOL for lawsuits I would think.

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mickie08,

Thank you again for your comments and I have you down in the NO CHANCE IN HE## column, meaning that we have no chance at all of getting a loan. You are probably right about it, but forgive me for not taking just your word for it and just rolling over and giving up. What fun would that be.

Lets see what happens next week with LO's or negotiations with OC's.  

[Anonymous]

LOL.  I did not mean to say you can not get a loan.  Just that no UW us going to overlook the  large debts.  That said, that's whay I gave you the advice on the best way to arrange having the accoutns paid through escrow.  I think it will turn on whether or not you can get the HELOC to agree to a smaller settlement.  With that out of the way, they may be more willing to turn a blind eye to the others.  Also, the others are older and probabaly more likley to take smaller offers.  As they say, it can never hurt to ask, can it?

Alot of posters around here see the collections must be paid mantra and immediately a revolt ensues about how collections do not have to be paid...Get a new LO... Yada, yada, yada.  I was mainly pointing out that there is a large and fundamental difference between a couple small credit cards that total 1-2K and this situation.  That does not mean there are not things you can do to try to work the deal out though. 

i would just be very careful about paying off any accounts without a guaranteed PFD or paying them through close.

Good luck.

[elaine829]

We live in missouri and went through a company called mortgage lenders of america they gave us the mortgage then sold the mortagage to countrywide a month later which now is bank of america. My husband had a capital one charge off ,a spiegal charge off and  a collection from midland which we was disputing a couple of medical collection which all of the accounts total about 6,000 dollars and i had a capital one charge off, a victoria secret charge off, a couple of medical collections. which all total about 3,000 dollars also we had a car that was repossed in 05. All charge offs were in 04. We got our loan right before i guess fha got stricter because i heard u have to have a 620 minimum. My husband had a 580 and my middle score was 640. We got lucky too the builder bought down our interest rate to 5.75 which i consider excellent with our credit scores. And we added closing cost to the loan so we didnt have to come out of pocket with anything and the builder paid what you call down payment help.

Message Edited by elaine829 on 09-05-2009 09:11 AM

[Anonymous]

UPDATE - 9-22-09

I wanted to come back and update this thread to give hope to those out there who need it. We received confirmation on Monday 9-21-09 from our new loan officer (Prime Lending) that we are APPROVED and cleared to close on 9-30-09. She told us we do not have to pay off the old CO's. Our rate is 30 year FHA @ 5.0% with 1% origination fee and 0 points. To say that we were shocked by the phone call would be a huge understatement.

To be honest with you we are now considering not actually buying the house at this time. I know it sounds CRAZY to possibly walk away from the deal once we worked so hard for it, but our gut feeling is walk away and just wait until we have more reserves in the bank. Our financial picture has changed a little over the last couple of months and we are concerned that once we close, we'll spend the first 6 to 8 months struggling to make ends meet with the increased payments. We haven't struggled in years and the thought of struggling without our financial safety net scares us to death.

I have to tell the loan officer and the other agent something on Tuesday, one way or the other.  Not 100% either way at this point.........I'll keep you posted.

[IOBA]

Thank you for the update. 

I have been reading this and wondering how a HELOC would NOT be paid off with the sale of the home.  I guess if they did not have a lien on the property at the time of closing it would make sense.

Good luck.