Paying Collections at Closing. Is this a good ideal???

[renaboo01]

Hey everyone,

I am set to close on my house August 17. My loan just came back from underwriting and my LO said that I have to pay two collections at closing. One is for $1000 and the other for $407. I have sent PFD to both agencies and they have yet to respond. They are both back from 2004, but the $1000 collection does not belong to me. I have dv'd, disputed, and offer to PFD. I know that the are legally not able to sue me, because SOL in Cali is 4 years. But I am scared to pay them at closing because it seems that that may re-age the debt making it look new once I close on my home. Has anyone had to pay CA's at closing? What happened once you did? Did they accept the amount that was on the credit report, or did they come back for interest? Any advice would be great.

Rena

[Anonymous]

First...pay the collections if you can afford them (which I assume you can) otherwise you aint gettin the house.

Second...dont do the PFD or verification letters, etc. You already got approved for the loan so there is no point in haggling over numbers or getting it deleted, but if you wait and you are sitting at closing without it settled your in trouble.It is going to fall off in 7 years regardless if you pay it or not, and if the accounts were opened outside of So.CAL, then is not 4 years if I remember correctly. 

Third...When you pay it, make sure you do certified check from a bank (dont do a money order, harder to trace) and send it overnight mail. Dont pay online or over the phone.

Fourth..Make sure you get a letter from the collector stating its settled.

Fifth...the debt collector is NOT entitled to anything extra (unless stipulated by a judgment order in court, or from the originial terms of the contract) so pay them exactly what is owed on the credit report. They are required BY LAW to accept it. If they don't or try to collect more, you are entitled to sue them in court, for $5000 and if you lose the house you can claim the value of  that as damages in addition.

Sixth..when you are sure the collections are paid, notify your lender...they can do soft pulls of your report with the new information (It may cost you $40 but worth it)

Seventh...A good tip! If you have the money, at closing have a mortgage check ready for the first one, have them apply it to your mortgage at closing, it saves you money!

[tater72]

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@Anonymous wrote:

First...pay the collections if you can afford them (which I assume you can) otherwise you aint gettin the house.

Second...dont do the PFD or verification letters, etc. You already got approved for the loan so there is no point in haggling over numbers or getting it deleted, but if you wait and you are sitting at closing without it settled your in trouble.It is going to fall off in 7 years regardless if you pay it or not, and if the accounts were opened outside of So.CAL, then is not 4 years if I remember correctly. 

Third...When you pay it, make sure you do certified check from a bank (dont do a money order, harder to trace) and send it overnight mail. Dont pay online or over the phone.

Fourth..Make sure you get a letter from the collector stating its settled.

Fifth...the debt collector is NOT entitled to anything extra (unless stipulated by a judgment order in court, or from the originial terms of the contract) so pay them exactly what is owed on the credit report. They are required BY LAW to accept it. If they don't or try to collect more, you are entitled to sue them in court, for $5000 and if you lose the house you can claim the value of  that as damages in addition.

Sixth..when you are sure the collections are paid, notify your lender...they can do soft pulls of your report with the new information (It may cost you $40 but worth it)

Seventh...A good tip! If you have the money, at closing have a mortgage check ready for the first one, have them apply it to your mortgage at closing, it saves you money!

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I am not sure if this is completely accurate. I would be interested in hearing what some of the moderators have to say. I thought if you paid off a collection there was the potential of the account reaging and your score dropping. 

[Anonymous]

DO NOT follow the advice given.  Pay the collections through your escrow agent at close.  They should not have a problem with that.  Contact the companies and the escrow agent and arrange this.  If you pay it now, they COULD re-age the account.  Your UW could very well (it is fairly common) re-pull credit immediately before close.  Any score drop can be a reason for denial and if you are close to the minimums would almost certainly make it a denial.  An older collection (2004 I believe you said) WILL likely lower your scrore a few points due to recent activity if paid.

SO, contact the companies you owe money to and have them send or fax you a letter with an exact amount and a letter clearly stating that X amount will fullfil the debt and no firther action will take place. 

give this letter to the escrow agent

Plan an having that much in cash or certified check (do not charge it on your card as the utilization may hurt your score as well) pluswhatever you already need to close.

The escrow agent will pay the items out of escrow to guarnatee that they are paid and that recipet is recieved.

Problem solved with no danger of an immediate score drop prior to close.

[Anonymous]

My apologies...

You are absolutely correct, I forgot to say at the beginning...if they don't let you pay at closing.

There are some situations/closing were they will not let you pay at closing, you have to do the work up front before hand.  A friend of mine had 2 open accounts for less than $50 each that he was told it was not worth doing at closing.

[Anonymous]

if that were the case, I would recomment paying by bank transfer, etc as close to close as possible to limit the chance of your score changin and reflecting the reaged collection prior to close.