FHA passes new strict guidelines on borrowers who have collections on credit reports

FHA’s attitude towards reducing its current levels of market share by up to 50% through passing strict new buyer guidelines is raising eyebrows in the tools it has chosen to use, to promote those goals.

FHA has initiated a new policy change regarding charge off’s or collections on a would-be homeowner’s credit report. FHA passes new guidelines stating " if a borrower has collections that total over $1,000" - then the borrower will be required to:

• Pay off all the collections
• Or make arrangements with the creditors to repay the debt
• Show 3 months of history on the payments being made as agreed
• Count those payment amounts in the debt to income Ratio
• Each collection account on the credit history must be shown as resolved or paid in full

FHA passes new guidelines changes that should actually increase the difficulty level of a borrower and restrict the ability of those looking for home ownership. This will effectively reduce the buyers pool nationwide. These new FHA guidelines are also intended to reduce risk. Borrowers in process of applying for an FHA loan should keep these changes in mind to close their loans before the date the guidelines are set to go into effect. FHA passes new guidelines that go into effect on April 1, 2012 for all FHA insured loans.

FHA passes new guidelines