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FHA Loan (Judgements & Collections)

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FHA Loan (Judgements & Collections)

My lender told me that since I have an open judgement for $1,500 and two collections for $256 (which will fall off in June) and $553, I am over the $2K threshold for collections according to FHA guidelines. My question is, do judgements count as collections? Or are they viewed separately?

Message 1 of 9
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Moderator Emerita

Re: FHA Loan (Judgements & Collections)


@Tahitipearl wrote:

My lender told me that since I have an open judgement for $1,500 and two collections for $256 (which will fall off in June) and $553, I am over the $2K threshold for collections according to FHA guidelines. My question is, do judgements count as collections? Or are they viewed separately?


Judgements have to be paid prior to closing. They are a public record so it doesn't matter if the judgement shows on your CR or not, what matters is the Satisfaction of the judgement. Judgements accrue interest the entire time they remain unpaid. They also last 10 years to 20 years and can be renewed if unpaid.  Look up your state's statutes so you know how long they last in your jurisdiction. 

Message 2 of 9
Member

Re: FHA Loan (Judgements & Collections)

So even if I have paid consistently on a payment plan for the judgement, I would still have to pay it in full before closing?

Message 3 of 9
Valued Contributor

Re: FHA Loan (Judgements & Collections)

I would believe that judgments and collections are separate. From what I have seen, the documentation from HUD only talks about collections in excess of $2000 and as SO10 said, judgments have to be paid off.


FICO 8 Scores
TU 752- EQ 751- EX 745

Message 4 of 9
Member

Re: FHA Loan (Judgements & Collections)

Okay, so I would have to pay off the judgement in full and as far as the collections, I can just leave them considering one is slated to fall off in June and the other is for only $553.... got it..thanks!

Message 5 of 9
Moderator Emerita

Re: FHA Loan (Judgements & Collections)

Judgements attach to the property and come in front of the mortgage lien - that's why lenders require their payoff prior to closing.

Message 6 of 9
Valued Contributor

Re: FHA Loan (Judgements & Collections)

Judgments must be paid prior to closing with one exception:

 

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

Mortgage Loan Officer licensed in CA & AZ


Message 7 of 9
Member

Re: FHA Loan (Judgements & Collections)

Thank you for clarifying! So since I've been paying consistently on this judgement for 2 years, I should be fine then....


@dpeezy wrote:

Judgments must be paid prior to closing with one exception:

 

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


 

Message 8 of 9
Valued Contributor

Re: FHA Loan (Judgements & Collections)


@Tahitipearl wrote:

Thank you for clarifying! So since I've been paying consistently on this judgement for 2 years, I should be fine then....


@dpeezy wrote:

Judgments must be paid prior to closing with one exception:

 

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


 


As long as you have an agreement in writing, you should be okay.

Mortgage Loan Officer licensed in CA & AZ


Message 9 of 9