FHA Delays Implementation of Collection Payoff Rule
Looks like the public outcry has FHA Collection Payoff Rule rethinking their position. Note in bold–wording regarding seeking additional input.
Posted as an FHA notice late April 6 regarding FHA Collection Payoff Rule:
In order to allow Mortgagees additional time to adapt their procedures to implement portions of the new guidance for the FHA Collection Payoff Rule found in Mortgagee Letter 2012-03 (ML 2012-03), FHA is delaying the effective date of the FHA Collection Payoff Rule from ML 2012-03:
- Handling of Disputed Accounts, Public Records
- Paying off Collections and Judgments.
"The new FHA Collection Payoff Rule prohibiting homebuyers from getting a Federal Housing Administration mortgage if they owe more than $1,000 in outstanding collections accounts could cut demand by up to 20%, according to banking analysts.
The FHA Collection Payoff Rule went into effect April 1. If a borrower enters into a payment plan on these accounts, then an exemption could be granted. Also, the FHA clarified the FHA Collection Payoff Rule this week, stating if a borrower documents the collections account stems from a "life event" such as a medical bill, divorce or loss of employment, he or she could still qualify for the loan."
JPMorgan Chase analysts estimate this FHA Collection Payoff Rule should negatively impact roughly 10% to 20% of demand for the FHA universe over the next two to three months."
The new effective date of the FHA Collection Payoff Rule is delayed until July 1, 2012. Prior to the effective date, FHA intends to seek additional input on this section and work to clarify guidance, as appropriate.
The Mortgagee Letter and FHA Total Scorecard User Guide regarding FHA Collection Payoff Rule will be updated and posted to HUD’s website on Monday April 9, 2012. Please Note: With this extension, any case numbers assigned prior to July 1, 2012 are subject to the previous guidance in effect for the FHA Collection Payoff Rule.
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