A: If I understand your question correctly, the Lender is merely requesting an LOE (letter of explanation) stating this account is not in dispute. If that's correct, then write it. If the lender is now wanting that dispute removed, that 's a different story. If this is the case AND your are applying either an FHA, VA or USDA loan, you need to call all three credit bureaus and tell them you are applying for a mortgage and you want that tradeline updated to "Dispute resolved, consumer disagrees". If you're applying for a Conventional loan, you must remove the dispute comment completely. This process can take 24-48 hours. The LO can also order a Correction/Rapid Rescore. If the charge off and dispute are really that old, then your score should not drop.
A: There are many reason why a LO would tell you this, but to not explain the thought process seems strange. But my best guess is either you need to bring more funds to close, need to show reserves, or this lender thinks your loan is very weak and they want to see you have some skin in the game.
Summary - With 30 years as a LO myself, I made the majority of my stupid and costly mistakes in the first 3 years of my career. It seems you may be working with a Rookie LO. I strongly recommend that you pick up the phone and press them to explain in greater detail the strategy or plan. I have learned over the years, that the more I educate my borrowers the fewer snarls and trap we run into. Please call and so you can get the straight scoop and not end up with denied loan.
Best wishes to you!
Branch Manager - Specializing in FHA, VA, USDA, Conventional, Jumbo, Portfolio and Non-QM Loan Products.