As if it is not getting harder to qualify for a loan, FHA put the scare in everyone for the last couple of months stating that FHA homeowners in Arizona and California would have to either:
- Pay off all their collections if it amound over $1,000 or;
- Have a payment arrangement with the collection company for a minimum payment history of 3 payments/ months.
The great news is that FHA came out today and stated that they were going to postpone the FHA requirement to "pay off your collection accounts" until they hear more public and industry comments before enforcing the requirement. Either you had enough people in the real estate industry screaming bloody murder or someone at the FHA came to their senses and realized how detrimental this could have been to a "still recovering" economy and housing market.
Lets thank the heavens for some good ole'fashioned common sense.
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Per FHA’s Notice to Lenders issued Friday April 6, 2012, FHA has allowed a delay in implementation of portions of the previous MTG LTR #12-03 (Academy’s Credit Policy Bulletin #12-10 & 12-15) that addresses:
- Handling of Disputed Accounts
- Paying off Collections and Judgments
The new effective date of this section of the MTGE LTR is delayed until July 1, 2012. Revision of the Mortgage Letter #12-03 and the FHA Total Scorecard User Guide will be updated and posted to HUD’s website today, Monday April 9, 2012.
With this extension, any case numbers assigned prior to July 1, 2012 are subject to the previous guidance in effect for the subject topics.
Collection Accounts & Judgments
HUD 4155.1 4.C.2.e
FHA does not require that collection accounts be paid off as a condition of mortgage approval. However, court-ordered judgments must be paid off before the mortgage loan is eligible for FHA insurance endorsement.