The Connecticut Housing Finance Authority (CHFA) Changes Collection Payoff Policy. CHFA has always had a strict policy when it comes to judgments and collections, so it was a surprise to me to see them changing their policy on the payoff of collections.
Effective today, March 4, 2011, all loans being registered with CHFA will not be require show proof that outstanding collections under $1,500 have been paid off. For example:
- A single outstanding collection account with a balance less than $1,500.00 do not have to be paid off in order to be eligible for financing.
- A single outstanding collection account with a balance equal to or greater than $1,500.00 must be paid in full to be eligible for financing.
- Multiple outstanding collection accounts with a total of $1,500.00 or more will need to be paid until the total amount of the collection is less than $1,500.00
- But Multiple outstanding collection accounts that do not total $1,500.00 or do not have to be paid.
- CHFA will continue to require outstanding judgments to be paid in full without exception.
CHFA is a loan program designed for First Time Homebuyers, and is one of the few loan programs in Connecticut that a homebuyer can still purchase a home with 100% financing. CHFA allows a homebuyer who has less than $5,000 of funds to borrower the total downpayment and closing costs. This means that many of the First Time Homebuyers who apply for a CHFA Mortgage do not have much money. In the past some of the Borrowers that met all of the qualifications for a CHFA Mortgage, have had to wait until they paid off all collections, even very small ones. For a Borrower that has limited funds this is a big challenge, so for them this is a huge change.
In a time that the trend has been to tighten up Loan Guidelines, this is a change in the opposite direction, and the first such move that I have seen in the last couple of years. It is a change that I have mixed feelings about. Even though it will open up the pool of homebuyers, it is a very risky one. If someone in not paying their obligations, and does not have enough money to pay off collections under $1,500, should they be purchasing a house? Time will tell, and I hope this change does not cause CHFA to start experiencing many of the same problems that others have recently gone through.
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Who To Call For Your Mortgage Needs In Connecticut:
George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308, gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage.
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