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This was the results from my friend trying to buy a house. Please help me understand these results. What's are some options of turning this into a positive situation?
With resolving the the accounts with disputes, would settling the accounts be a better than having it paid in full? What better for the loan eligibility?
Results:
664 credit score
Multiple accounts with disputes (ACS Eastweek Student Loan, LVNV Funding, Capio) – 2 of these exceed the $500 limit as allowed below
A couple of accounts are collections that occurred within past 3 years (LVNV Funding, Capio) – based on guideline below they would have to be paid
DU A/E findings: Valid only with no disputed accounts.
Total Scorecard requires DU A/E to be downgraded to a MANUAL UW if there are disputed accounts. All disputed accounts must have disputed account notations removed by credit reporting agencies and credit report re-run and re-scored and a new DU A/E obtained to be valid. (“Dispute resolved customer disagrees” is permitted)
If disputed accounts cannot be removed the mortgage application must be referred to a DE underwriter for manual review.
If the credit report reveals that the borrower is disputing any credit accounts, manual downgrade of a TOTAL Scorecard Approval/Accept recommendation is not required if the disputed account reflects any of the following on the credit report. The disputed account:
o Has a zero balance; or
o Is reflected as paid or resolved;or
o Is less than $500 and is more than 24 months old based on the date of the dispute· Collections
o For all DU Approved/Eligible loans will use findings and not require payoff of collections/charge-offs/Profit & Loss (P&L) item(s).
o All manually underwritten loans with any collections/charge-offs/Profit & Loss (P&L) item(s) greater than $5,000 (except medical) must be paid in full if established in the last 36 months.
Gift funds (properly sourced) and proceeds from cash out refinance loans are allowed to pay these off.
All manually underwritten loans with any collections/charge-offs/Profit & Loss (P&L) item(s) greater than $5,000 (except medical) must be paid in full if established in the last 36 months. The loan is not a manually underwritten loan - therefore, the DU language applies and overrides this statement.
That said, it is incredibly inadvisable to parse out an answer on these questions without the benefit of not only the full credit report, but the full loan package.
Settled accounts = paid in full accouints, if creditor offers settlement, it's the same as paying in full.
Personally, I would make sure there is a great letter of explanation in the file and let the underwriter dictate what needs to be done........but I enjoy a relationship of mutual trust with my underwriters, where many of the LO/UW relationships are adversarial (and that is putting it kindly in some cases).
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