Disputing Collection Accounts for FHA Loans

New Rule for FHA loans

FHA guarantees its loan to the lenders but their emergency fund to back up bad mortgages was running low. To stem the tide of red ink, FHA announced an increase in the funding fee and changes that will keep those with poorer credit histories from getting FHA loans. Part of the loan process is the preapproval, where banks dig into a borrower's history and pull his or her credit reports. It is done one more time before closing to make sure nothing has changed. This can trip up some buyers.

Pay Off That Amount

Now, buyers with $1,000 or more on file in collection accounts will be denied a loan if they cannot pay off the delinquent amount or prove they have set up a payment plan. This excludes accounts that are more than two years old or are related to theft.

Exception to the Rule

FHA also says borrowers can be exempted if the debt is part of a "life event." That means it has to be tied to a divorce, death, loss of employment or medical bills.

The original articles can be found here and here.