Re: HELP! Medical Bills

Posted by Carol (64.12.101.154) on May 21, 2002 at 02:04:40:

In Reply to: HELP! Medical Bills posted by Michael on May 18, 2002 at 10:20:09:

Here's my viewpoint as a mortgage underwriter - this is long, so settle in :

First, we're all aware that bad things happen to good people. Let's look at an FHA borrower. If I'm looking at $1500 in medical collections that are as in your wife's case, over 2 years old, a borrower who has saved, but will only have a month or two in reserve after closing, has good job stability and an excellent explanation for the collections, I'll be less inclined to require those collections to be paid off - especially if there is evidence that the bills were supposed to be paid by insurance. If they're over 3 or 4 years old, I may not even ask for an explanation if everything else (other credit, employment, savings, etc.) falls into line.

FHA is rather ambiguous when it comes to paying off collection accounts. On one hand it says paying them off is not a requirement, yet on the other we're supposed to consider requiring payoff if the individual collection is more than $250.00 or an aggregate of $1,000.

If I have an FHA borrower who will be left with $15,000 in the bank after closing, I'll strongly recommend paying off those collections because to do so will not cause a hardship and will improve their credit scores, unless the borrower can give me a satisfactory, concrete reason why they should not be paid in full.

Hopefully you won't consider this to be an incredibly ambiguous answer . If I were underwriting your file I would give careful consideration to your overall creditworthiness, that is, have you and your wife established a good payment history on other accounts since the collections? If you have no credit cards or car payments, do you have alternative credit sources (electric company, phone company, auto insurance, etc.). How is your rental history? How is your job stability? Have you demonstrated an ability to save? Are there compensating factors I can use to offset those collections? In other words, aside from those collections, will I feel comfortable giving an approval? Do I believe you'll make your payments in a timely manner? If so, and believe me after 15 years in the mortgage business you get a 'feel' for it, then I'd have no problem waiving payment of those collection accounts.

It's called common sense underwriting and hopefully you'll find a mortgage underwriter who works the same way.

Good luck!

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