FHA Guidelines Updated

There are new rules on FHA loans starting Oct 15^th concerning collections and judgments:

FHA is requiring lenders to follow these guidelines when collection accounts are present with an aggregate balance equal to or greater than $2000.

1. If the cumulative outstanding balance of all collections is LESS than $2000, then no further consideration is required.

2. If the cumulative outstanding balance of all collections of ALL borrowers is equal to or greater than $2000 the lender must include monthly payments in the borrower’s debt to income ratio for accounts that will remain open after closing. This means that we will need to document payment arrangements with the creditor and count the payment or use 5% of the outstanding balance.

*Medical collections and charge offs are excluded from this guidance.

*Judgments – Loans for borrowers with outstanding  judgments are generally not acceptable unless the following documentation is obtained:

 

a. Judgment must be on the credit report

b. If the judgment will not be paid off and released prior to the closing,  evidence of a payment agreement may be considered. The payment agreement must be in writing and provided at the time of underwriting. Crescent will require evidence that 12 months satisfactory payments have been made as scheduled. Borrowers may not pre-pay scheduled payments in order to meet this requirement. The monthly payment must be considered in the borrower’s debt-to-income ratio for qualifying