ON VA loans, the seller can pay collections on the borrower’s behalf out of the seller contribution subject to the max allowable.
ON FHA loans, the seller CAN NOT pay collections on the borrower’s behalf out of the seller contribution.
We must be able to document that the borrowers self-employment is ACTIVE via third party documentation within 30 days of the Note/Funding Date.
Please note. FHA has delayed the handling of disputes and collections accounts until July. It appears they would like to put out more clarifications and guidance before the release. So at this point the policy on collections and disputed accounts as of March 31, 2012 is still in effect. At this time we will also delay the Safe Harbor policy as it would not be needed until July as well.