10.11 DISPUTED ACCOUNTS (03/09/16)

© RHS HB-1-3555 SFH Guaranteed Loan Program Technical Handbook

Disputed accounts on an applicant’s credit report are not considered in the credit score.

Manually underwritten loans. For manually underwritten loans, all disputed accounts with outstanding balances/payments must have a letter of explanation and documentation supporting the basis of the dispute. Those debts that have been excluded from the debt ratios must have evidence in the permanent loan file to support a justifiable dispute. Evidence may include correspondence form the applicant/their attorney to the creditor. The lender is responsible for analyzing the documentation presented and confirming that the explanation and supporting documentation are consistent with the credit record during the underwriting analysis.

Automated Underwriting System – GUS “Accept”. Loans underwritten with the assistance of GUS that receive an underwriting recommendation of “Accept” will be downgraded to a “Refer” and manually underwritten unless the following conditions are met on the credit report:

• The disputed trade line has a zero dollar balance.
• The disputed trade line is marked “paid in full” or “resolved.”
•  The disputed trade line has a balance owed of less than $500 and is more than 24 months old.

Loans downgraded for failure to meet any of these conditions are subject to a manual review and require the submission of the complete underwriting case file.