USDA (and FHA) Rejected

[Pragmatist]

We were rejected on our USDA (and she said FHA would reject us too), because of a couple of CR entries. One entry we are working on getting removed, and it appears to be some error with the county tax collector. The second report is a CC that cancelled the debt by filing a 1099-C and we paid a bunch of taxes on. The LO said we need to open the CC debt and pay in full or make payment arrangements, because they can come back and put a lien on a house. It's cancelled. We can't open it or make payments, and I don't believe they can get a lien on anything we own at this point. 

We really need to get out of this home (and renting is not an option for various reasons). Is what she is saying correct?

[Chris3k2]

hmmm... I had been looking up some information about having a charge off cancelled and filing a 1099-c because my girlfriend actually had to do that this year for usaa. there were some varied answers. Some said you would still have to pay but I think i saw it lean more towards that once it's filed you know longer have to pay it and it should be removed from the credit report because it's being considered as income on your taxes. I'm not expert just giving you some info of what i found on google. hopefully somebody with more knowledge can come and help out.

[Pragmatist]

My husband seems to think it stays the full 7 years, but that they cannot sue you over the amount. I can't get a straight answer. The LO said that she is going to try to ask the underwriters, but it's rare they will accept that answer, and that we'd need to get a letter from the CC company, which is like opening a can of worms, imo.