Collections: Do they have to be paid for Mortgage Loan Approval?

Does Fannie Mae require charge off’s and collections to be paid for a mortgage loan approval?

Desktop Underwriter (DU) For DU underwritten loans, for one-unit, principal residence properties, borrowers are not required to pay off outstanding collections or non-mortgage charge-offs—regardless of the amount.

Note: If you mark the collection account Paid By Close in the loan application, DU will issue a message in the DU Underwriting Findings report stating that the collection must be paid.

For two- to four-unit owner-occupied and second home properties, collections and non-mortgage charge-offs totaling more than $5,000 must be paid in full prior to or at closing.

For investment properties, individual collection and non-mortgage charge-off accounts equal to or greater than $250 and accounts that total more than $1,000 must be paid in full prior to or at closing.

For additional information, see FNMA Selling Guide: B3-6-07, Debts Paid Off At or…