FHA delays collections rule

Lenders had feared that up to 20% of borrowers could be cut out of the market if the new rule barring loans to clients with more than $1,000 in collections accounts went into effect.

By Teresa at MSN Real Estate Apr 13, 2012 1:36PM

© Creatas/agefotostockIn the new world of tighter credit, mortgage lenders are looking for ways to add more guarantees that borrowers will not default on their loan.


One new rule, which had been scheduled to go into effect April 1, would deny Federal Housing Administration loans to anyone who had more than $1,000 in disputed or unpaid collection accounts.


After estimates that the change in policy could put up to 20% of FHA mortgage applicants out of the market, the FHA has delayed implementation of the rule for three months and will collect additional comment.


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Previously, collection accounts on a credit report did not scuttle the loan. Instead, it knocked it into manual underwriting, and borrowers allowed to explain the collection. For example: Perhaps it was in error, but the borrower had not yet persuaded the collection company.

FHA loans are favored by first-time and less affluent homebuyers because they can buy a house or condo for as little as 3.5% down.

Although denying loans to people who have not paid their bills in the past seems logical, the practices of the credit-collection industry make it quite possible that people could have old or erroneous collections data in their records.

Syndicated columnist Kenneth R. Harney talked to Jeremy House, a loan officer in Arizona, who noted that many Americans have old medical collections accounts, valid or not, in their files. Harney wrote:

House cited the example of an applicant with a FICO score of 770 who recently discovered that two new medical collections had popped up on his credit reports. The applicant said he had no knowledge of the unpaid bills or the doctor, and believes them to be in error. But the appearance of the collection items knocked his FICO score down to 655. Under the new FHA policy, it could take months to dispute and resolve the issue.

Although the new policy has been delayed, at least until July 1, Harney's advice to consumers still stands: If you're thinking of buying a house, get a copy of your credit report well in advance so you have time to dispute any errors.

Tags: loans
Apr 21, 2012 10:16PM



Many lost there jobs due to downsizing companies or just companies going out of business.


A correction of accounts should be corrected by agencies that show people how to manage there debts by joining Care One Credit or Consumer Credit Counsel Programs. This will allow a more organized program for those wanting to show improvement due to hardship issues.


Credit reports have always been a result of verification. But how long will this be the only option to get a better rate?


A reasonable statement and proof of your hardship should be considered, negative collection accounts should be managed and income verification/earnings should be the new approval determination to allow approvals.


Back up benefits should be a factor: Life insurance, Disability Insurance, etc as unemployment per state will not assist (some states only pay 66% of earnings. est) Also part of your mortage should have a savings account for emergency to cover each mortage holder in case of an emergency.


Short Sales and Foreclosures that took place after our countries down fall (recession) hardship is an issue that need new loan regulations that help those that loss.





Apr 21, 2012 9:34PM
This just makes me mad. Oh you poor babies, 20% will be cut out. Waaaaa cry me a river! My husband and I are a family of 5 w/ a great rental history, but because we pay such a high rent each month we can't save enough to buy a house. We have no outstanding bills, we pay every month on time and have a decent, within a few points of 700, credit score and yet, we can't qualify for a home loan because we can't come up w/ the down payments. Then to hear people are whining and complaining because they can't get a home loan w/ delinquent accts. is just ludicrous. They have no business getting a loan for enough to buy a house if they can't afford to pay their $1,000 + credit accts.!
Apr 21, 2012 8:23PM
20 percent, holy cow. I can't imagine what demographics of other people claiming FHA must amount too. I'll have my six figures in the next year and then I don't care about a home loan. i'll live in a trailer for all I care. Try living in Conn. where 200k gets you garbage with no garage. Every day I see my future go south and for what reason....because the greedy public, wall street and washington can't keep there hands off honest peoples earnings. Tax them to death, overinflate their home values so banks can increase the size of your loan, thus their bottom line. And total uncertainty in the energy department. Souns like a ****ing win to me....
Apr 21, 2012 7:56PM
joe.as a builder, cant you put together a small house without the bells and whistles for the have-nots?.........have you ever thought about maybe the good lord put you on this earth to help people?.....just build a 1200 sq ft. house with just a 1 stall garage and no air conditioning......you should be able to build that for 80,000  and the peoples house payment will be less than they are paying for rent..........
Apr 21, 2012 7:35PM

So many of you people leaving comments have no clue whos fault this was .. sheesh   .. You should do a little investigative work and find out whats really going on... we have not seen the end to this by a long shot ...you should all brush up on your survival skills and start thinking about taking care of your  your families . The  basic things you need to live with is what is going to be important and 2nd, is what your going to use for money.  Wise up people... use the mind that was giving to you... You'll soon see.

Apr 21, 2012 7:22PM

Fedup948 wrote - Why not give the homeowner the price of the foreclosure. This would not hurt the taxpayer and I think the Banks and Fannie Mae and Freddie Mac have enough "monies" to cover the principal reduction.

How in the world is that fair to those people that chose to live within their means and buy what they could afford.  This is rewarding folks that made poor choices and broke promises.  Can you tell the class where the banks, Fannie and Freddie get their money?

Apr 21, 2012 6:47PM
OK, if you don't have the means  to pay, then all that Fannie May is ensuring is that you don't cause us (the TAX PAYERS) any more problems. This keeps those that aren't playing fair out of the market.  Sounds fair to me.
Apr 21, 2012 6:35PM

Think about How Strong America would be right Now if everyone conducted their affairs and had the SAME philosophy as Dave10????   BRAVO Dave BRAVO.  My situation mirrors yours. And i've been preaching the same my whole life.

Apr 21, 2012 6:21PM
Bw---------Same place it has always been save a down payment, pay what you owed get a good credit rating AND buy a house.
If you think you should get it  now, no down payment with lousy credit or insufficient income, get out of town, handouter.
You parasites have already cost us enough.

Apr 21, 2012 6:18PM
Fedup--------- Wouldn't hurt the taxpayers, who in the devil do you think is providing that money, the tooth fairy, you parasite ?
God you people are worthless.

Apr 21, 2012 6:00PM
As the greed of wall street bankers take over the credit writing rules, and as a result, as more and more Americans are cut out of the slice of the American Pie standard of living, a new class is developing of upper middle class third world Americans who have no future to own anything on credit, especially if you owe over $1,000 to the credit monopoly. This is America? Where's the dream of ownership?
Apr 21, 2012 5:08PM
Take personal responsibility and live within your means or just below. My wife and I are in our 40s and we own our house out right, our cars are paid for and we do not have any outstanding loans or credit card balances.  Our cars are old and our house is small but we owe nothing. Together we only clear just under $50,000 a year.  I learned my finances from my grandmother. She had a saying, " I pay cash for it or I do not have it and mostly I do not have it."
Apr 21, 2012 4:55PM
If you want to learn where the housing crisis went all wrong, watch the documentary "Inside Job" available on Netflix. It made me sick. All the CEOs of the big banks and lenders- greediest pieces of sh*t on the planet.
Apr 21, 2012 4:19PM

Why not give the homeowner the price of the foreclosure.  This would not hurt the taxpayer and I think the Banks and Fannie Mae and Freddie Mac have enough "monies" to cover the principal reduction.


Apr 21, 2012 4:18PM
The credit system is just dumb anyway. but guess without it everyone wouldn't be where they live today...! Speaking for the many 'borrowers' out there. If you rent, you are fine actually. Cash talks. But credit and its ridiculous standards to qualify is what makes this society what it is. And yes we all follow suit. Maybe after dec 21, 2012 it won't even matter anymore!
Apr 21, 2012 4:05PM
sprues2, To late! It got ugly a long time ago. Handouters are just wining louder.
Apr 21, 2012 4:01PM
Rick? you sound like my brother in law. He's full of sh#$ too.
Apr 21, 2012 3:47PM
Try again--- Keep it to yourself handouter,I'm not christian and don't care what happens to you handouters
You are ersatz life forms, without merit, worth, value, honor or integrity.
Your febrile attempts to shame me, are worthless..
I would step over your worthless body, on my way to work..
You handouters still haven't received the message, we have had enough.
You can work, earn and pay your own way or starve and we are approaching the, "don't care which" place.

Apr 21, 2012 3:40PM
What So Ever You Do To The Least Of My Brother That You Do Unto Me
Apr 21, 2012 3:34PM
ok teabagger, whatever you say. Handouter?  kinda rolls right off the tongue doesnt it.
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