The Federal Housing Administration has delayed a rule that would have stopped home buyers from getting a government-backed mortgage if they had ongoing credit disputes over $1,000.
The new rule started April 1, but the federal agency on Friday delayed the rule to July 1, an FHA spokesman said. The agency will also seek public comments from builders, lenders and others in the real estate and mortgage industries before July.
Under the new rule, buyers with collection accounts will either have to pay off the debt or enter into a documented payment plan. Buyers will also have to show that three payments have been made toward the debt. Before the rule, an underwriter could determine whether the collection accounts would impact the approval of a mortgage.
Since the housing market tanked and banks tightened lending standards, more buyers have sought government-backed loans because the loans could be approved with lower credit scores.