NEED HELP!!! WELLS FARGO SETTLEMENT

[CW83]

I appreciate in advance any responses to my post; I don't have anyone to discuss these issues/challenges with. I came to this forum in hopes of getting some opinions/advice. 

Challenge: 

Wells Fargo Student Loans has contacted me "offering" me a settlement. I know that paying the entire balance will take me a minimum of 2 years if not 3 years with very aggressive payments. The settlement I can pay off in 8 months (they offered 12 equal monthly payments). The representative stated today that they have to report the debt as paid - settled because they have to report the same thing for every customer. She was unwilling to budge about reporting as anything but paid - settled. 

I want to buy a house or condo in 12 to 18 months should I take the settlement? Can you get a mortgage with closed accounts with a balance? Any idea of how hard a settlement will affect my score? 

[rmduhon]

I don't know the answer to your question about mortgages, but if you settle there wont be a balance on this account. But settled doesn't look as good as paid on a manual review which a lot of mortgages are. You might talk to the lender you plan on using and ask them which way would be best.

[RobertEG]

Every mortgage lendor has their own underwriting criteria for loan approval.

Usually, discharge of the debt is their only concern, as once the debt is paid, their is no longer an issue of a possible judgment or lien on the property based on that delinquent debt.

When a debt is settled for less, it is still paid, and must be reported as paid, $0 balance.

The creditor then has the option of additionally reporting the special comment adding that the debt was settled for less than its full amount.

That advises others that they took a loss in having extended credit to you.  That is always a negative factor that a potential lendor can consider as part of their lending determination, but does not give rise to potential legal issues, such as a judgment lien on the property. 

In most cases, that will not be an issue in their underwriting, but only they can answer the extent to which it may effect their lending determination.

However, they may have additional underwriting requirements, such as no paid bad debts within the last year.

If you know who your potential mortgage lendor might be, you can contact them and pose your question....

[CW83]

Thanks! I haven't thought so far as a lender yet. Maybe I should and I can get some answers that way. Thanks again!