www.lasvegasmtg.com Report: FHA proposed changes for collections and disputes on credit reports.
by John Le Francois
www.lasvegasmtg.com Report: FHA proposed changes for collections and disputes on credit reports were to take affect on April 1,2012 but has now been delayed till July 1, 2012. The proposed changes are addressing disputes, collections and judgments that show on a credit report. FHA released mortgagee letter 2012-3 refers to the following:
- Requires borrowers with collections with a combined total greater then $1,000 must be paid off including medical collections if the accounts are less then 2 years old activity date.
- Disputed accounts must be removed except for identity theft and or unauthorized use of account.
- Borrower must repay the debt off or enter in to a repayment plan and consistently made three consecutive payments.
- Judgments must be paid off but a repayment plan and three consecutive payments can acceptable.
Why the changes on disputed, collections and judgments to obtain a FHA loan?
”We found that many borrowers with mortgage payment delinquencies had prior credit deficiencies, including unpaid collections and unresolved disputed debts prior to the approval of their loan,” an FHA spokesperson said. “This change was made to eliminate this layer of risk to FHA-insured loans and help protect our insurance fund.”
With FHA under pressure from increases in claims due to mortgage defaults and foreclosures, it has become apparent to FHA regulators that increasing UFMIP and the Annual Mortgage Insurance Premium can not be the only answer to keep FHA loan guarantees being insolvent.
Collection companies and judgments being reported on credit reports has been shown to be inaccurate at least 76% of the time. This was the reason that FCRA (Fair Credit Report Act) was implemented so the consumer had the right to challenge inaccurate information that was being reported. With many unscrupulous collection companies re-aging old collection accounts in violation of the Fair and Accurate Credit Transactions Act of 2003 (FACTA) will the abuse only become more prevalent as a form of extortion to collect old debt? 24 states now allow collection companies to have arrest warants issued to collect debt owed to them. Recently a woman who survived breast cancer was falsely arrested for a $280 medical bill that was billed in error.
Will this impact some consumers? The answer is yes, most definitely. Will this be a problem for FHA buyers in Las Vegas? Yes.