Effective April 1st the Federal Housing Administration (FHA) has announced they will not issue mortgages to borrowers who have an ongoing credit dispute of $1000.00 or more on their file. Borrowers will either have to pay the balance of the dispute or enter into a payment plan making at least three payments. Payment plans will need to be submitted to the FHA and will be included into the debt to income ratio when applying for the mortgage.
This will not apply to disputed amounts from more than two years ago or if it is related to identity theft. This is aimed at protecting the FHA emergency fund which has found that many borrowers had prior deficiencies including unpaid collections and is an additional level of risk to the insurance fund.
Some believe this may reduce the number of loan originations by as much as 33 -50%.