Collections/Charge-offs/Judgments and Disputed Accounts – FHA Program

HomeBridge is reminding brokers that FHA issued new guidance on collections, judgments and disputed accounts in Mortgagee Letter 2013-24 issued on August 15, 2013.

The new policy applies to case numbers assigned on or after October 15, 2013 and applies to the standard FHA program and credit qualifying Streamlines; it does not apply to non-credit qualifying Streamlines.

Medical collections and charge off accounts are excluded from the collection account policy.

Credit Analysis – Collection Accounts and Judgments

Manually Underwritten Loans

HomeBridge must examine the collections/judgments to determine if they were due to:

• The borrower’s disregard of their financial obligations, or
• The borrower’s inability to manage debt, or
• Extenuating circumstances beyond the borrower’s control.

Borrowers with a collection account(s) and/or judgment(s) are required to provide a letter of explanation (LOE) and documentation that backs up explanation provided in the LOE for each outstanding collection account and/or judgment. The letter must document that the collection and/or judgment was not due the borrower’s disregard of their financial obligations, or their inability to manage debt.

All of the information provided must be consistent with the borrower’s other credit information.

DU/TOTAL Scorecard “Approve/Eligible