Earlier this year, HUD released Mortgagee Letter 2012-3 which featured tougher underwriting guidelines. This week they released ML 2012-10 which effective immediately recinds the guidelines that would impact:
- paying off collections and judgements; and
- disputed accounts
All other guidelines address in ML 2012-3, including those that address income of self employed borrowers, are still going into effect.
Per ML 2012-3, the old guidance (which is now the “effective” guidance per ML 2012-10) does not automatically require collections to be paid off however judgements do need to be satisfied and paid off. Disputed accounts are to be referred to underwriting (and most likely will need to be removed from the credit report).
Again, we’ll need to see how banks and lenders treat this rescission of guidelines or if they opt to stick with the tougher requirements by creating their own underwriting overlays.