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FHA: Old debt? no problem

By Polyana da Costa ·
Tuesday, June 19, 2012
Posted: 8 am ET

Borrowers are no longer required to pay off their collection accounts to be able to get an FHA mortgage.

The Federal Housing Administration has just revoked a rule that denies FHA mortgages to borrowers who have accounts over $1,000 in dispute or collection.

The rule went into effect in April and was later postponed. It was scheduled to become effective in July. Under the rule, borrowers with unpaid, disputed debt would be required to pay off the account in full or enter a repayment agreement before they could get approved for an FHA mortgage.

Not anymore, the FHA says. After a couple of months of pressure and criticism from the housing and lending industry, the rule is gone.

Many borrowers rely on FHA mortgages because FHA-insured loans allow low down payments. The new rule, combined with higher FHA mortgage insurance fees, would have prevented many borrowers from getting a mortgage.

So that's one less thing for FHA borrowers to worry about. But unless you're refinancing an FHA loan under the streamline refinance program, you're still stuck with higher mortgage insurance fees.

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