Fannie Mae & Collections – Good News

Happy Friday!  DID YOU KNOW? 

Fannie Mae – A Good Option for Open Collections

FHA loans generally don’t require open collection accounts to be paid, but they will in most cases require that a payment is calculated based on the balance of the unpaid collection account. Needless to say, FHA’s method of qualifying borrower’s with collections can become problematic.

Fannie Mae, on the other hand, makes qualifying with collections easy (at least when the subject property is a 1-unit!). Please take a look at the Fannie Mae guidance below for  reminder on how to approach unpaid collection accounts:

When the subject property is a 1-unit Principal Residence: Borrowers are not required to pay off any outstanding collections or non-mortgage charge-offs regardless of the amount, unless specified in the DU findings.

When the subject property is a 2–4 unit Owner-Occupied Primary Residence or Second Home: Collections and non-mortgage charge-offs that total more than $5,000 must be paid in full prior to or at closing.

When the subject property is an Investment Property: individual collection and non-mortgage charge-off accounts greater than or equal to $250 and accounts that total more than $1,000 must be paid in full prior to or at closing.

All the best,

Don