FHA..... Disputed Accounts & Collections. UPDATE!!!

[Anonymous]

I have A LOT of charged of accounts, a paid off collection and a collection acctoung ($480) on my credit report but all are around 6 years old. My middle credit score is 642 and I was told by my LO that it won't be a problem getting me approved. I have another issue (judgment) so I'm not going to be included on the loan but if it wasn't for the judgment, apparently all those charge offs aren't a problem. 

[ShanetheMortgageMan]

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@Anonymous wrote:

I have A LOT of charged of accounts, a paid off collection and a collection acctoung ($480) on my credit report but all are around 6 years old. My middle credit score is 642 and I was told by my LO that it won't be a problem getting me approved. I have another issue (judgment) so I'm not going to be included on the loan but if it wasn't for the judgment, apparently all those charge offs aren't a problem. 

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Correct, it is underwriter's discretion if unpaid collection or charge-off accounts have to be paid off.  Most (I'd say 70%'ish) will go by the automated underwriting findings, which in my 12 years of experience have never required collection or charge-off accounts to be paid off (only exception is for non-owner occupied/investment properties). 
With a 642 FICO score, and those negative accounts being 6 years old, very unlikely an underwriter would require them to be paid.

[Anonymous]

Maybe the wrong place to ask- I went through a serious accident a few years ago, ran up bills while out of work for over a year, declared ch 13 bankruptcy after being only able to work part time. I used up all my assets trying to stay current. My condition worsened, and halfway through my ch 13 repayment plan, had to quit working. Hardship discharge from the bankruptcy will be next month. No debts, just started getting disability income. Mtg was included in the BK, but I just missed 2 payments before the disability income started. I need to move, can't afford this house but can afford a smaller home.. A mtg payment will be cheaper than rent. Question- I have enough now for 5% down but can afford as much as 20% down with gift from relative. Score at about 639, was perfect for 20 yrs before becoming disabled. PITI will be below 31% of income with no other debt. I know there are mtgs available with my score, but with the current discharge from BK, and the non-payment on the mtg that was included in the bankruptcy, will the fact that the situation was beyond my control allow me to get a mtg at all? I know I will need to supply an explanation, but I can document why I had the financial problems. I read that 'direct endorsement' is likely going to be required. Whatever that means. Next question- Am I better off with 20% down, other than saving PMI or MIP? I would love to be able to buy with 5% down or less, depending on interest rate differences.

[playboy]

I'm looking at possibly getting a FHA mortgage by the end of the year with a Florida First Time Homebuyer bond to cover the 3.5% downpayment requirement and I need some questions answered.

1.  Credit: My scores are: Transunion 653, Experian 634, Equifax 675.  I have 5 credit card charge offs that have been paid and one credit card collection that has been paid on the Transunion report.  4 of those 6 items are scheduled to fall of my Transunion report by Oct of 2013.  Two will remain until at least June of 2014.  On my Equifax & Experian reports there are 9 charge off listed and all of those will fall of the report by Oct of 2013.

Since June of 2010 I've opened 5 tradeline accounts with the last one having been opened in Oct 2011.  The total balances on all 5 are $1,700 which I will have paid by August.  

2.  My gross income is $63,350 per year.

3. Source of income is employment.  

4.  Monthly debt payment is $430 for student loans.

5.  I'm employed by a company (not self employeed) and I have been in my current position for 3 years in May.  I've been in the industry for 10 years.

6.  Assets/Reserves: I don't have a down payment but I'll begin to saving later this year.  I have 2 checking accounts.  A 401k account in which I can pull funds but will not and a separate Spiders ETF.

7. Location: I'm in Hillsborough County, Florida.

8. The property is a new single family home.

9. Value: The home price range I'm comfortable looking at is $150k to $188k.

10. Occupancy: Primary residence

11. Transaction Type: Purchase

My concerns are the charge offs that are likely to appear on my median score report.  I suspect that my median score will be the Transunion score.  As such if I want to have credit pulled in Sept 2013 I'll have 3 charge off that appear.  How will that affect my chance of getting a loan?  Will the automatic underwriting that the FHA loans go through approve it or is it likely to be deferred for furthur review bc of the charge offs?  

The score estimator from this site estimates that if I paid down the balances on my current tradelines, my score could be anywhere between 673 & 710.  I'm hoping for at least 680.  How much of a factor will the score have on the interest rate that I could get?

Thanks,

[IWANTAHOUSENOW]

Does this mean that my collections account of $1300 with applied bank and city county credit union $215 wont matter or I have to resolve both debts?      

Good FHA news

‎06-19-2012 06:49 PM

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, DC 20410-1000 ASSISTANT SECRETARY FOR HOUSINGFEDERAL HOUSING COMMISSIONER 

Date: June 15, 2012

To: All Approved Mortgagees

Mortgagee Letter 2012-10

Subject Miscellaneous Underwriting Issues- Rescission of Disputed Accounts and Collection Accounts Guidance (Mortgagee Letter 2012-3)

Purpose In order to provide clarification of policies concerning Disputed Accounts and Collection Accounts through future guidance, FHA is rescinding the new guidance on the following topics in Mortgagee Letter (ML) 2012-3, which was to become effective July 1, 2012:

Handling of Disputed Accounts, Public Records FHA Total User Guide Chapter 2, and Handbook 4155.1 4.C.2.e, Paying off Collections and Judgments.

All other guidance in ML 2012-3, which became effective April 1, 2012, remains in effect.

Effective Date This rescission is effective immediately.

Affected Topics

This ML rescinds changes announced in ML 2012-3 related to the following topics found in HUD Handbook 4155.1 and the FHA Total Mortgage Scorecard User Guide.

HUD 4155.1, Mortgage Credit Analysis for Mortgage Insurance 4.C.2.e, Paying Off Collections and Judgments FHA TOTAL Mortgage Scorecard User Guide Chapter 2, Credit Issues, Disputed Accounts The existing guidance found in Handbook 4155.1 and the FHA TOTAL Mortgage Scorecard User Guide for these topics remains in effect.

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, DC 20410-1000 ASSISTANT SECRETARY FOR HOUSINGFEDERAL HOUSING COMMISSIONER Mortgagee Letter 2012-10,

Mortgagees who assigned case numbers between April 1, 2012, and April 8, 2012, will not be deemed to be in violation of HUD requirements, if the case numbers were processed in accordance with either the existing guidance or that announced in Mortgagee Letter 2012-3 regarding the affected topics in this Mortgagee Letter.

Paperwork

Reduction Act

The information collection requirements contained in this document have been approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB control number 2502-0579. In accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB control number.

Questions If you have questions regarding this Mortgagee Letter, please call the FHA Resource Center at 1-800-CALLFHA (1-800-225-5342).

Persons with hearing or speech impairments may reach this number via TTY by calling the Federal Information Relay Service at 1-800-877-8339.

Signature Carol J. Galante Acting Assistant Secretary for Housing-Federal Housing Commissioner

[IWANTAHOUSENOW]

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, DC 20410-1000 ASSISTANT SECRETARY FOR HOUSINGFEDERAL HOUSING COMMISSIONER 

Date: June 15, 2012

To: All Approved Mortgagees

Mortgagee Letter 2012-10

Subject Miscellaneous Underwriting Issues- Rescission of Disputed Accounts and Collection Accounts Guidance (Mortgagee Letter 2012-3)

Purpose In order to provide clarification of policies concerning Disputed Accounts and Collection Accounts through future guidance, FHA is rescinding the new guidance on the following topics in Mortgagee Letter (ML) 2012-3, which was to become effective July 1, 2012:

Handling of Disputed Accounts, Public Records FHA Total User Guide Chapter 2, and Handbook 4155.1 4.C.2.e, Paying off Collections and Judgments.

All other guidance in ML 2012-3, which became effective April 1, 2012, remains in effect.

Effective Date This rescission is effective immediately.

Affected Topics

This ML rescinds changes announced in ML 2012-3 related to the following topics found in HUD Handbook 4155.1 and the FHA Total Mortgage Scorecard User Guide.

HUD 4155.1, Mortgage Credit Analysis for Mortgage Insurance 4.C.2.e, Paying Off Collections and Judgments FHA TOTAL Mortgage Scorecard User Guide Chapter 2, Credit Issues, Disputed Accounts The existing guidance found in Handbook 4155.1 and the FHA TOTAL Mortgage Scorecard User Guide for these topics remains in effect.

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, DC 20410-1000 ASSISTANT SECRETARY FOR HOUSINGFEDERAL HOUSING COMMISSIONER Mortgagee Letter 2012-10,

Mortgagees who assigned case numbers between April 1, 2012, and April 8, 2012, will not be deemed to be in violation of HUD requirements, if the case numbers were processed in accordance with either the existing guidance or that announced in Mortgagee Letter 2012-3 regarding the affected topics in this Mortgagee Letter.

Paperwork

Reduction Act

The information collection requirements contained in this document have been approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB control number 2502-0579. In accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB control number.

Questions If you have questions regarding this Mortgagee Letter, please call the FHA Resource Center at 1-800-CALLFHA (1-800-225-5342).

Persons with hearing or speech impairments may reach this number via TTY by calling the Federal Information Relay Service at 1-800-877-8339.

Signature Carol J. Galante Acting Assistant Secretary for Housing-Federal Housing Commissioner

[lifeiswhatImakeit]

If someone could give me some advice on my situation I would greatly appreciate it... I am wanting to buy my first home. I have 9 CC with 4 PIF, 4 around 25-35% util for now, and 1 @ 90% util(yes, I know I've got to work on this one,but I've been using most of my money to pay the major cards and this is a store card, JCP). I also just paid off an auto loan early because the interest was worth it. I have not checked my FICO scores yet because I am waiting on the new balances to post to my report. However, I have checked my score with the Wal-Mart FICO and it was a 659. I am looking to qualify for a USDA or FHA loan beacuse of the down payment required but when I spoke to the LO @ my local bank before I even knew what my scores might be she said that there were alot of programs for me to help with down payment assistance. I'm a first time homebuyer and a single parent. I am also on SS disability (serious health issues) I also work casual part-time with about an extra $400 a month. I have 5 Medical CO, all have not reported or updated since 2010, they are all under $1000. As a matter of fact the total of them isn't $1000. I have excellent payment history no lates. My util was what held my score back from it's potential. But I am taking care of that, and I have made great progress. But I am concerned should I worry about these CO or should I follow the plan I'm on and  continue to put my extra money into further reducing my util. Paying my car off freed up $260 a month. It is March and I would love to be in my own home before the new school year starts in August. Any advice is greatly appreciated!

[JM-AM]

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@lifeiswhatImakeit wrote:

@If someone could give me some advice on my situation I would greatly appreciate it... I am wanting to buy my first home. I have 9 CC with 4 PIF, 4 around 25-35% util for now, and 1 @ 90% util(yes, I know I've got to work on this one,but I've been using most of my money to pay the major cards and this is a store card, JCP). I also just paid off an auto loan early because the interest was worth it. I have not checked my FICO scores yet because I am waiting on the new balances to post to my report. However, I have checked my score with the Wal-Mart FICO and it was a 659. I am looking to qualify for a USDA or FHA loan beacuse of the down payment required but when I spoke to the LO @ my local bank before I even knew what my scores might be she said that there were alot of programs for me to help with down payment assistance. I'm a first time homebuyer and a single parent. I am also on SS disability (serious health issues) I also work casual part-time with about an extra $400 a month. I have 5 Medical CO, all have not reported or updated since 2010, they are all under $1000. As a matter of fact the total of them isn't $1000. I have excellent payment history no lates. My util was what held my score back from it's potential. But I am taking care of that, and I have made great progress. But I am concerned should I worry about these CO or should I follow the plan I'm on and  continue to put my extra money into further reducing my util. Paying my car off freed up $260 a month. It is March and I would love to be in my own home before the new school year starts in August. Any advice is greatly appreciated!

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USDA may require you to pay the CO's. Since they are more then 2 years old it will be a more YMMV depending on Lender.

FHA you would be okay under your circumstances, but the MIP (which is PMI) will be for the life of the loan by time you are ready to purchase, and this may put FHA a little high for you with your income and DTI.

There are many programs available for first time homebuyers, there are housing programs in most states that offer assistance to purchase homes. You can look at your housing sites in your state and see what is available for you.

You also have the option to try NACA if it is available to you in your state. The process is a little longer and if you started now you may have a chance to be in your home by August. This is an excellent program with lower rates, no down payment, no closing cost, no pmi, and things of that nature.

[lifeiswhatImakeit]

Is there a difference between charge off and collections? Because if there is I meant that my Medical are Collections. Sorry if this is a dumb question but I am trying to educate myself. Thanks

[lifeiswhatImakeit]

Sorry I just thought of something else. You mentioned my DTI but the 4 cards that are 20-35% will be paid off by 4/5/13. I have lower end credit limits so it's not that much to pay. I was going to make sure they were $0 balance before offically applying anyway. That means I will only have that 1 card to be considered debt right? It is only $45/month minimum but I'm going to be paying more. With my SSDI and part-time income I have about $2150 each month. My rent is $500 and since I paid my car off other than the CC I have no other debt. Shouldn't I be fine on DTI?

BTW thanks for the info

[JM-AM]

It depends on how much the house is, the taxes, home owners insurance, home owners association fees if there are any.

I believe you will be okay as long as you stay within your range. Just so you know when collecting SSI your gross you collect will be raised so makes your income a little higher. Also your part time income has to be consistent for a few years to be considered, and your income is based off the gross amount, not the amount you take home.

When purchasing a home you need to keep a few things in mind before you purchase.

For example...

You take home $2150 a month...now just do a few comparisons on bills you may pay to see what you are comfortable with..

Food--- $400 a month (have no clue just giving you an idea)

Car fuel --- $100 a month ( have no clue just an idea)

Electric--- $150 a month (have no clue just an idea)

Water---$50 a month (have no clue just an idea)

Cell Phone-- $50 a month (may not have one)

General Home Maintenance--- $50 a month (this is not actually a bill, but is realistic what it will need to upkeep your home on a monthly basis, cut grass, change filters, light bulbs, etc etc..)

Credit Card--- $45 a month until paid off

Leaving it at that will be $845 a month

Subtract from $2150 - $845 = $1305

$1305 left for Principle and Interest, taxes, Homeowners Insurance, and possibly PMI (or MIP if FHA).

You also have to remember to put a small savings away as much as you can for needed repairs and replacement of items if things should happen to break.

So being realistic, you really would not want to spend more then $800-$900 a month which would include your Priniple and Interest, Taxes, Homeowners Insurance, and PMI. and that may at times seem a littl expensive.