FHA Collections and Disputed Accounts
Beginning October 15th, FHA is changing how they will be handling Collections and Disputed
If the sum of the borrower’s Collection Accounts total less than $2000, then payments for
these accounts do not have to be analyzed.
If the sum of the borrower’s Collection Accounts total $2000 or more, then payments for all
accounts must be analyzed and included in the DTI.
Collection Accounts can be paid off in full to avoid including the payment in the DTI. If no
evidence of monthly payment can be found for a Collection Account, 5% of the outstanding balance
will be considered as payment for calculating the DTI
Collection Accounts of a Non-Purchasing Spouse in a community property state are included in the
sum total unless state law otherwise excludes it.
All medical collections are excluded from the sum total.
**Note**: All Collection Accounts on the credit report will be considered unless exempted above.
FHA will continue to consider them in the $2000 calculation, even if paid off, until new credit is
uploaded with the Account updated/removed.
All judgments must be paid off prior to the loan closing unless there is a written agreement
for a payment plan.
In order to accept a payment plan for a judgment, the written agreement must be provided along with
evidence that at least 3 payments have been made and that all payments have been made on time.
Any payment plan for a judgment must have its monthly payment include in the DTI
Judgments of a Non-Purchasing Spouse in a community property state must be included, unless
excluded by state law.
Disputed Accounts are considered Derogatory in any of the following situations
o Disputed charge-off accounts
o Disputed collection accounts
o Disputed accounts with any late payments in the last 24 months
If the cumulative amount of Derogatory Disputed Accounts is $1000 or greater, the loan is
automatically downgraded to “Refer” status and is ineligible by Century Guidelines.
With acceptable provided evidence, the following types of Derogatory Disputed Accounts can be
excluded from the $1000 limit:
o Medical Accounts (no documentation required)
o Identity theft
o Credit card theft
o Unauthorized use
o Derogatory Disputed Accounts of non-purchasing spouses
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