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Conditions include providing payoff statement for a 6+ yr old collection

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Conditions include providing payoff statement for a 6+ yr old collection

I finally heard back from the processor with the mortgage conditions. All of them were pretty basic, a few random letters, docs I've already provided, etc. EXCEPT for one big one: they want me to provide payoff statements for two collections and one charge-off that are good through my estimated date of closing.

 

The charge-off and one collection are both very small and I'll pay. But the major issue is the last collection. It's 6+ years old, outside the SOL in my state, and will fall off my reports in March 2020. It's also 16k. It was a 3k debt from an old landlord that inflated to 9k magically when they sent it to collection, and has risen to 16k from interest and fees in the years since. I'm categorically not going to pay 16k to make this mortgage happen when if I waited a few months, I could get a mortgage without paying a dang dime of that 16k. They've never taken any collection action whatsoever and now it's too late... it's just a matter of waiting for it to fall off.

 

I don't know for sure whether I HAVE to pay it off to close but requiring payoff statements sure implies that. I've had this one collection as the top of mind issue all along (other than DTI from student loans), and I am very frustrated to have it pop up as a condition now. I technically could pay it but that begins to seem pretty absurd, especially when my local market went from hot to stalled out over the last year. Odds are this builder will STILL have homes to buy in March when that debt is off my reports. The only problem would be that I have to either renew my lease 1/31 or move into temp housing. 

 

Argh. So frustrated by this. Any advice for how to handle this? 

FICO8: Low 700s. FICO9: Mid 700s. Goal: 800 club
Message 1 of 14
13 REPLIES 13
Regular Contributor

Re: Conditions include providing payoff statement for a 6+ yr old collection

I had a collection that was 6 and a half years old when I applied for a mortgage. They approved and didn’t ask me to pay it off (very lucky), and it eventually fell off.

However, if they had asked me to pay the collection first, I would’ve walked away.

I don’t care how perfect the house or how inconvenient a lease would’ve been. I’m not re-aging a 6 year old collection.

Message 2 of 14
Valued Contributor

Re: Conditions include providing payoff statement for a 6+ yr old collection

Be very very careful! Any contact with these people particularly asking for payoff details may “reset” the time clock! For that much money I would get some Expert advice from someone in your state that can positively clarify your position.

PS I would walk.... that’s just me!
Message 3 of 14
Contributor

Re: Conditions include providing payoff statement for a 6+ yr old collection

What are your credit scores?
Honestly id wait because Thats crazy to pay off when itll be off in a year. Sadly im guessing you’re already under contract? But I definitely wouldn’t pay it.
Message 4 of 14
Frequent Contributor

Re: Conditions include providing payoff statement for a 6+ yr old collection

As the previous poster eluded to. If you're under contract and put any money in Escrow, you'll lose that if you walk. I certainly agree I wouldn't be touching any 16k collection that will get removed in a year.

Message 5 of 14
Valued Contributor

Re: Conditions include providing payoff statement for a 6+ yr old collection


@Readyformyhome wrote:

I finally heard back from the processor with the mortgage conditions. All of them were pretty basic, a few random letters, docs I've already provided, etc. EXCEPT for one big one: they want me to provide payoff statements for two collections and one charge-off that are good through my estimated date of closing.

 

The charge-off and one collection are both very small and I'll pay. But the major issue is the last collection. It's 6+ years old, outside the SOL in my state, and will fall off my reports in March 2020. It's also 16k. It was a 3k debt from an old landlord that inflated to 9k magically when they sent it to collection, and has risen to 16k from interest and fees in the years since. I'm categorically not going to pay 16k to make this mortgage happen when if I waited a few months, I could get a mortgage without paying a dang dime of that 16k. They've never taken any collection action whatsoever and now it's too late... it's just a matter of waiting for it to fall off.

 

I don't know for sure whether I HAVE to pay it off to close but requiring payoff statements sure implies that. I've had this one collection as the top of mind issue all along (other than DTI from student loans), and I am very frustrated to have it pop up as a condition now. I technically could pay it but that begins to seem pretty absurd, especially when my local market went from hot to stalled out over the last year. Odds are this builder will STILL have homes to buy in March when that debt is off my reports. The only problem would be that I have to either renew my lease 1/31 or move into temp housing. 

 

Argh. So frustrated by this. Any advice for how to handle this? 


Since that one is beyond the SOL, it should not be a major factor tor the lender as the note holder has no legal recourse to collect. If I were you I would seek clarification from the mortgage lender on wheather even that one needs a payoff statement. If it is required I would seek the mortgage elsewhere.

TU fico08=823 10/28/19
EX fico08=813 10/16/19
EQ fico08=823 10/04/19
EX fico09=810 10/02/19
EQ fico bankcard08=844 09/24/19
Message 6 of 14
Frequent Contributor

Re: Conditions include providing payoff statement for a 6+ yr old collection

I finally heard back from my LO. The reason the large collection has to be paid off is because factoring in the 5% monthly payment puts me over the DTI ratio... the only reason that's the case is that I have 225k in student loan debt. So this isn't a case where I have CCs or something I can just pay off. She said I could establish a payment plan with them vs. paying it off, but a payment plan seems even worse than settling.

 

Also, the builder required a 20k earnest money deposit so walking away isn't much of an option unless I can get that back. If they're willing to give me a mortgage and all I have to do is pay $50 a month or something, I doubt that would qualify to get my earnest money back even though the impact of that $50/mo would be re-activating a giant debt.

 

I'm going to contact the original creditor to see if they're open to settling. Their original bill was 3k and they inflated it to 9k when they sent it to collection,  so I may have some leverage there. I'll retain an attorney to ensure I'm not accepting liability for this debt, too.

FICO8: Low 700s. FICO9: Mid 700s. Goal: 800 club
Message 7 of 14
Valued Contributor

Re: Conditions include providing payoff statement for a 6+ yr old collection


@Readyformyhome wrote:

I finally heard back from my LO. The reason the large collection has to be paid off is because factoring in the 5% monthly payment puts me over the DTI ratio... the only reason that's the case is that I have 225k in student loan debt. So this isn't a case where I have CCs or something I can just pay off. She said I could establish a payment plan with them vs. paying it off, but a payment plan seems even worse than settling.

 

Also, the builder required a 20k earnest money deposit so walking away isn't much of an option unless I can get that back. If they're willing to give me a mortgage and all I have to do is pay $50 a month or something, I doubt that would qualify to get my earnest money back even though the impact of that $50/mo would be re-activating a giant debt.

 

I'm going to contact the original creditor to see if they're open to settling. Their original bill was 3k and they inflated it to 9k when they sent it to collection,  so I may have some leverage there. I'll retain an attorney to ensure I'm not accepting liability for this debt, too.


The builders earnest money does change things, but I would seek another lender. Having a debt repayment figured in to the DTI does not make any sense on a debt the CA has no legal means to force such a collection on. I do not understand why the builders earnest money would prevent walking away from that lender. If the CA holding that note cannot sue due to the SOL, why would that debt be figured into the DTI? The DTI is usually a factor because it can affect your ability to make the monthly payments, and unenforcable collections that have no legal means of enforcement will not affect your ability to meet the mortgage payment. Is the builder demanding that lender be used? I would get a mortgage elsewhere.

TU fico08=823 10/28/19
EX fico08=813 10/16/19
EQ fico08=823 10/04/19
EX fico09=810 10/02/19
EQ fico bankcard08=844 09/24/19
Message 8 of 14
Frequent Contributor

Re: Conditions include providing payoff statement for a 6+ yr old collection


@sarge12 wrote:

@Readyformyhome wrote:

I finally heard back from my LO. The reason the large collection has to be paid off is because factoring in the 5% monthly payment puts me over the DTI ratio... the only reason that's the case is that I have 225k in student loan debt. So this isn't a case where I have CCs or something I can just pay off. She said I could establish a payment plan with them vs. paying it off, but a payment plan seems even worse than settling.

 

Also, the builder required a 20k earnest money deposit so walking away isn't much of an option unless I can get that back. If they're willing to give me a mortgage and all I have to do is pay $50 a month or something, I doubt that would qualify to get my earnest money back even though the impact of that $50/mo would be re-activating a giant debt.

 

I'm going to contact the original creditor to see if they're open to settling. Their original bill was 3k and they inflated it to 9k when they sent it to collection,  so I may have some leverage there. I'll retain an attorney to ensure I'm not accepting liability for this debt, too.


The builders earnest money does change things, but I would seek another lender. Having a debt repayment figured in to the DTI does not make any sense on a debt the CA has no legal means to force such a collection on. I do not understand why the builders earnest money would prevent walking away from that lender. If the CA holding that note cannot sue due to the SOL, why would that debt be figured into the DTI? The DTI is usually a factor because it can affect your ability to make the monthly payments, and unenforcable collections that have no legal means of enforcement will not affect your ability to meet the mortgage payment. Is the builder demanding that lender be used? I would get a mortgage elsewhere.


Good point. I don't have to use this lender, but I do get a 5k credit for closing costs if I do.

 

I don't close until late November so I think I'll get my lawyer to see if she can get them to withdraw the debt or at least concede it was actually 3k and then settle from that 3k. It would be cheaper to settle for 30% of 3k than to lose the 5k closing cost credit with this lender. 

 

If that doesn't work (although it really should since the only bill they ever sent was for 3k, you can't magically decide someone owes you 9k), then I'll try to find a lender who will not factor in this account.

FICO8: Low 700s. FICO9: Mid 700s. Goal: 800 club
Message 9 of 14
Valued Contributor

Re: Conditions include providing payoff statement for a 6+ yr old collection


@Readyformyhome wrote:

@sarge12 wrote:

@Readyformyhome wrote:

I finally heard back from my LO. The reason the large collection has to be paid off is because factoring in the 5% monthly payment puts me over the DTI ratio... the only reason that's the case is that I have 225k in student loan debt. So this isn't a case where I have CCs or something I can just pay off. She said I could establish a payment plan with them vs. paying it off, but a payment plan seems even worse than settling.

 

Also, the builder required a 20k earnest money deposit so walking away isn't much of an option unless I can get that back. If they're willing to give me a mortgage and all I have to do is pay $50 a month or something, I doubt that would qualify to get my earnest money back even though the impact of that $50/mo would be re-activating a giant debt.

 

I'm going to contact the original creditor to see if they're open to settling. Their original bill was 3k and they inflated it to 9k when they sent it to collection,  so I may have some leverage there. I'll retain an attorney to ensure I'm not accepting liability for this debt, too.


The builders earnest money does change things, but I would seek another lender. Having a debt repayment figured in to the DTI does not make any sense on a debt the CA has no legal means to force such a collection on. I do not understand why the builders earnest money would prevent walking away from that lender. If the CA holding that note cannot sue due to the SOL, why would that debt be figured into the DTI? The DTI is usually a factor because it can affect your ability to make the monthly payments, and unenforcable collections that have no legal means of enforcement will not affect your ability to meet the mortgage payment. Is the builder demanding that lender be used? I would get a mortgage elsewhere.


Good point. I don't have to use this lender, but I do get a 5k credit for closing costs if I do.

 

I don't close until late November so I think I'll get my lawyer to see if she can get them to withdraw the debt or at least concede it was actually 3k and then settle from that 3k. It would be cheaper to settle for 30% of 3k than to lose the 5k closing cost credit with this lender. 

 

If that doesn't work (although it really should since the only bill they ever sent was for 3k, you can't magically decide someone owes you 9k), then I'll try to find a lender who will not factor in this account.


There is on other thing that might can get it off your report, and I would ask the lawyer about it. You might find that the CA does not have the necessary paperwork to be able to validate the debt, which could explain why the CA did not sue before it reached the SOL. They are required to validate the debt when requested by the person who owes the debt. If they can't produce the copy of the contract to prove the debt is valid, then I think the CRA will have to remove it due to not being validated.

TU fico08=823 10/28/19
EX fico08=813 10/16/19
EQ fico08=823 10/04/19
EX fico09=810 10/02/19
EQ fico bankcard08=844 09/24/19
Message 10 of 14
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