     David R (Dave29) | Friday, November 17, 2000 - 05:37 pm 
I have a three-year-old collection for $2,000 from an apartment complex. In a nutshell, I broke my lease with the now former apartment manager with the "verbal" understanding that I would pay six weeks rent and forfeit my security deposit, which I did.
About 13 months after I moved I received a call from a collection agency demanding $2,000. I refused to pay it and I even had to file a complaint with the State of Ohio AG's Office because the collection agency violated several state (and federal) laws.
In addition, State of Ohio law requires that a landlord must attempt to rent any apartment that has been vacated as a result of a broken lease. I lived in a very desirable apartment and I can't imagine that any judge would believe they could not rent it in almost six months! Needless to say, they didn't even attempt to take their claim to small claims court.
Aside from this collection, my credit is excellent. If I provide an "explanation letter" to a lender, will it likely have enough weight so that I do not have to pay the collection? |
| Michael Bardelli (Bull22) | Saturday, November 18, 2000 - 03:41 am
I'll take a stab at this one as I was in almost exactly the same situation before closing on my mortgage as you are now. I live in Virginia so the laws are different but lenders are pretty much all the same on the credit issue. Here goes.
I applied for my mortgage and when my credit was run there was a collection for a repossesed(spelling) car on there that was four years old at the time with a balance of about 9,400$. The loan officer instantly told me that the entire process was dead at that point because they will not lend to anyone with an unpaid collection on their report. Their reasoning was simple: If they give you a mortgage and the collection agency runs your credit(which they often do periodically wheather or not you have contacted them in some time), they will see that you have a mortgage "real estate" loan on there and will pursue legal action to place a lien on your property. At that point the bank will feel that you don't have any more incentive to pay and guess what that means, foreclosure. This is an expensive process for the bank. You might have every intention to pay no matter what, but the bank doesn't see it that way. What I had to do was negotiate with the collection agency first to obtain a settlement. After that, the collection agnecy was nice enough to fax it to the loan officer. only after that would the package go to underwriting and then on to approval. The simple point is this: A lender will not approve a mortgage package with an unpaid collection on the credit reports. Now all lenders and states are different but I think this will be true 99% of the time. Like I said above, I had to pay mine and then I got approved. Christine please correct me if I'm wrong, but this is how it is. Good luck.
Mike |
| Don Semler (Dsemler) | Sunday, November 19, 2000 - 04:16 pm
David,
As a lender in Ohio I can tell you that you may not have to pay it off. Though I agree with Michael that most of the time you do end up having to negotiate. I think in Michael's case it was the size of the collection that concerned everyone.
To give you an example, I have a young couple who had a voluntary repo 5 years old for $5k. Since then, there has been no attempt by this creditor to collect and the reporting is 3 years old, we went ahead with a 97% LTV FHA loan. Now this was the ONLY negative on their report.
If you try and go with a Zero down, 97% Fannie/Freddie you may have to pay it off or negotiate with a the creditor, but if you try FHA you may be able to get around it with a good letter and some documentation. Besides the rest or your credit, we will look at assets/reserves. debt ratio's, change in housing expense. It just all has to make sense. Few people are perfect.
Let me know if I can help further. |
