A new rule prohibiting homebuyers from getting a Federal Housing Administration mortgage if they owe more than $1,000 in outstanding collections accounts could cut demand by up to 20%, according to banking analysts.
The rule went into effect April 1. If a borrower enters into a payment plan on these accounts, then an exemption could be granted. Also, the FHA clarified the rule this week, stating if a borrower documents the collections account stems from a “life event” such as a medical bill, divorce or loss of employment, he or she could still qualify for the loan.
On the bright side, it means that someone with $999 in collections will no longer be impacted or required to pay these to qualify.