New Guidance from FHA Regarding Collection Accounts

For case numbers assigned on or after April 1, 2012, FHA will require that collection accounts with a total outstanding balance equal to or greater than $1,000 be resolved. The borrower must either pay the account(s) in full with verified funds or provide evidence that they have entered into payment arrangements with the creditor(s) with a minimum of six* months verified payments (i.e. “paid as agreed”). The payment arranged must be included in the calculation of the borrower’s DTI.

Note: Paying “down” of balances on disputed accounts and collections to reduce the singular or cumulative balance to below $1,000, is not an acceptable resolution of accounts.

FHA continues to require judgments to be paid off. An exception to the payoff of a court-ordered judgment may be made if the borrower has an agreement with the creditor to make regular and timely payments with a minimum of six* months payments made according to the agreement. The monthly payment must be included in the borrower’s debt-to-income ratio.

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