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Do Judgments, Liens, Collections, & Charge-Offs Need To Be Paid Before Closing?
With Conventional Mortgages becoming more popular in recent months, because of FHA changes and proposed changes, I felt that it would be good to write a blog on a regular obstacle for Conventional Borrowers.  With many people having lost their jobs in recent years, it is not uncommon for them to have during that time acquired Judgments, Liens, Collections, and Charge-Offs.  So a regular question is Do Judgments, Liens, Collections, & Charge-Offs Need To Be Paid Before Closing? The simple and quick answer to that question is YES.  But, and there seems to always be a but, there are some exceptions.
The Fannie Mae Guideline on Judgments, Liens, Collections, & Charge-Offs is as follows.  Delinquent Credit Accounts such as:
Taxes Judgments Charge-Offs Liens That have "the potential to affect Fannie Mae's position or diminish the borrower's equity -- must be paid off at or prior to closing."  However, like I stated above there is a but.  Fannie Mae makes an exception for Collection or Charged-Off Accounts the are less than:
$250.00, or If the total cumulative balance is $1,000 or less. Fannie Mae makes one additional exception for Collections, and Charged-Off Accounts, but this third exception has little chance of getting ... more

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