kcnjamie

HELP! How can I clear charge-offs for a Mortgage!

7 posts in this topic

Hi Everyone!

I received a pre-approval for a mortgage (YAY!) BUT I have to clear up some credit report items before the loan is finalized. The items we have to clear up are 3 charge-offs that show from OC's and a collection from Midland Funding. The mortgage is a VA Loan and this type of loan requires that the 4 debts  be paid with a proof of payment from the creditor.

More than likely all 4 debts SOL has passed, but I don't have the time to do any of the preferred credit repair steps when dealing with debt that SOL has passed.  I need to be able to provide something to lender showing the debt doesn't exist or is paid as soon as possible.

So after doing real quick research on what options are available, I was thinking the quickest and simplest way to get this taken care of is to contact the OC's and offer to settle and request a letter that debt is paid in full. 

So my questions are:

1) Have I missed other options I can pursue?

2) If I do settle and make a payment, will that restart the clock?

3) What is a reasonable percentage to offer for settlement? All of the debt is old and would have fallen off in the next year or so. (YES, bad planning on my part!)

Thanks in advance!

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7 hours ago, kcnjamie said:

1) Have I missed other options I can pursue?

Yes.  NEVER EVER pre-app for a mortgage without cleaning up your credit first.  Creditors like Midland subscribe to a list from the credit bureaus of all consumers who apply for a mortgage then compare it to the names they have on their list of consumers they have accounts for.  Once Midland found out you needed/wanted a mortgage that gave them all the power because they know you have to settle with them to get approved.  You lost all your leverage in negotiating for less than the amount they think they are owed.

7 hours ago, kcnjamie said:

2) If I do settle and make a payment, will that restart the clock?

Not if you word the settlement agreement properly that it is a full and final settlement and any remaining balance cannot be sold and is disputed.

7 hours ago, kcnjamie said:

3) What is a reasonable percentage to offer for settlement? All of the debt is old and would have fallen off in the next year or so.

Start at 25% and go up until you get a number you can both live with.  DO NOT be shocked if they simply hold out for the full amount knowing you want that mortgage.

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Thanks for the response @Clydesmom!

Yep, I screwed the pooch not clearing them up beforehand.  :(  Needing a mortgage came up suddenly because of relocating for a job. But now that it's all done, the mortgage is going forward and we will be closing in about a month as long as I submit documents from the creditors saying they debts are cleared up. I am prepared to settle but I want to exhaust any other options first.

1) So just to confirm from your response,  the only option at this point is to settle?

2) Is it possible to  do anything else in the time I have available in regards to the SOL being up or because it looks like maybe the account(s) have been re-aged?

3) If settling ends up being my option, are you saying I should send in a settlement agreement in writing? I am concerned that will take too long. Can I call them to make a settlement agreement? Or maybe email?

5) Is there a sample available for settling?

4) Your response mentioned Midland Funding which is a collections. But 3 others are OC's: BOA and 2 Chase debts which show as charge-offs. Would the process be the same for all 4 debt issues?

Thanks again for the response!!

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Are you sure VA requires they be paid? That used to be the case with FHA, but now FHA will fund without paying creditors, assuming that you could still cover the mortgage assuming that all creditors sued and won. They have a formula. Surprised if same didn't exist for VA.

I mention it because not all lenders we dealt with were "up to date" on latest regulations.

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10 minutes ago, Goody_Ouchless said:

Are you sure VA requires they be paid?

VA requires it.  They are very rigid on their financing rules.

3 hours ago, kcnjamie said:

1) So just to confirm from your response,  the only option at this point is to settle?

If the lender wants it dealt with and you want to close in a month:  YES settling is your only option.  The creditors know it.

3 hours ago, kcnjamie said:

2) Is it possible to  do anything else in the time I have available in regards to the SOL being up or because it looks like maybe the account(s) have been re-aged?

There are TWO SOLs one for suing and one for reporting.  The creditors hang on to the bitter end reporting when they no longer sue for exactly situations like yours.  You want a mortgage and can't get one without dealing with them.

3 hours ago, kcnjamie said:

3) If settling ends up being my option, are you saying I should send in a settlement agreement in writing? I am concerned that will take too long. Can I call them to make a settlement agreement? Or maybe email?

ANYTHING you agree to verbally cannot be enforced.  You can call and negotiate the terms and fax/email a settlement offer and then pay when you get the signed copy faxed/emailed back.

3 hours ago, kcnjamie said:

4) Your response mentioned Midland Funding which is a collections. But 3 others are OC's: BOA and 2 Chase debts which show as charge-offs. Would the process be the same for all 4 debt issues?

Yes, the process is the same.

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FYI VA has no such rule. The rule is from the creditor and it is their requirement. If the SOL has passed and they won't do the loan keep looking for another creditor. If you are unable to find one or want to move forward with your current creditor then make the deal that you will have a cashiers check for those creditors at the time of closing. If yoi pay it off before then it will all show back up on your credit report trashing your score and you definitely won't get the loan.

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