@Anonymous wrote:
Everything was going fine with our FHA loan. We had a Cook County Law Magistrate Civil Judgment drop from all three CRAs back in July. This was associated with our foreclosure (condo association that was never operative so we didn't pay).
Preapproval, blah blah blah. LO asked about this--he saw it by whatever service they use but told me it was absolutely NOT a problem. He's a seasoned LO.
Other lender from competing company also saw it and said it was fine AFTER speaking to the underwriter.
Yesterday, I get conditional approval and that is noted in the amount of 5,700, saying it needs to be satisfied or a payment plan in place.
Why did the LO even go forward--this is NOT gray area, I don't think. Maybe he thought it was ok because of the July 2017 rules, and it isn't reported, but it's there, of course.
Anyway, no one has gotten back to me and I'm sort of freaking out. Is this due to this lending company having more overlays?
I am fine getting into a payment plan, but I don't even know who to contact to arrange something like this. According ot the underwriter, I need three months of payments. We were supposed to close this month.
Hi Redrayya1,
Unfortunately you got bad advice from not one but 2 different lenders.
Here's what happened with the first one.
If it's not on the credit report then the underwriter wont know about it so it's ok. The problem here is lenders pull nationwide public records searches so if it's recorded they will find it.
I have no idea what happened with the 2nd lender because the FHA guidelines are clear, it has to be paid or you have to have a payment plan in place with 3 payments made & you cannot pre-pay to reach the 3 payment minimum.
Here are the actual guidelines:
(2) Standard
The Mortgagee must verify that court-ordered Judgments are resolved or paid off prior to or at closing.Judgments of a non-borrowing spouse in a community property state must be resolved or paid in full, with the exception of obligations excluded by state law.
Exception:
A Judgment is considered resolved if the Borrower has entered into a valid agreement with the creditor to make regular payments on the debt, the Borrower has made timely payments for at least three months of scheduled payments and the Judgment will not supersede the FHA-insured mortgage lien. The Borrower cannot prepay scheduled payments in order to meet the required minimum of three months of payments.The Mortgagee must include the payment amount in the agreement in the Borrower’s monthly liabilities and debt.The Mortgagee must obtain a copy of the agreement and evidence that payments were made on time in accordance with the agreement.
(3) Required Documentation The Mortgagee must provide the following documentation:- evidence of payment in full, if paid prior to settlement;
- the payoff statement, if paid at settlement; or
- the payment arrangement with creditor, if not paid prior to or at settlement, and a subordination agreement for any liens existing on title.
The only other option is if the judgment is past the statute of limitations you can try & argue that it's no longer valid.
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