10.10 NON-FEDERAL JUDGMENTS (03/09/16)

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

The presence of court-ordered non-Federal judgments must be considered in the credit analysis. Unpaid judgments may represent an applicant's disregard for credit obligations. Lenders must document reasons for approving a mortgage when the applicant has judgments. Usually judgments are paid in full prior to loan eligibility.

The following is applicable to all underwriting types.

1) Open and unpaid non-federal judgment. Non-federal judgments that are open and unpaid are ineligible for SFHGLP.

2) Exception to open and unpaid judgment – repayment plan underway. An exception to payment in full of outstanding judgments can be made when the applicant(s) have a payment arrangement with the creditor and have made regular and timely payments for the three months prior to loan application. Prepaying scheduled payments as a means of meeting minimum requirements is unacceptable. Lenders will obtain a copy of the payment agreement and validate payments have been made in accordance with the payment agreement. The payment agreement will be included in the debt-to-income ratio.

Unless precluded by state law, judgments of a non-purchasing spouse in a community property state will be paid in full or meet the exception guidance provided in this Paragraph.

Note: With the exception of an IRS tax debt with a repayment plan underway, an outstanding Federal judgment that is open and remains unsatisfied is ineligible for the SFHGLP.