A Fannie Mae DU-underwritten loan for a one-unit principal residence has two medical collection accounts totaling $1,850. Neither is a judgment or lien, and neither is marked Paid By Close. Under the cited DU collection-account rule, must these accounts be paid in full before closing?
Correct Answer
D) No: medical collection accounts are not required to be paid in full under this DU rule
D. This DU rule does not require full payment of the medical collections. Medical collections are excluded from the listed collection-balance limits. This underwriting treatment is different from deleting a credit-report entry or forgiving a debt. Scope and exceptions: Other loan requirements, accurate classification and applicable lender conditions remain relevant. Judgments, liens and merely past-due accounts have different treatment. Marking a collection Paid By Close can generate a payoff requirement in DU findings. Source: Past-Due, Collection, and Charge-Off of Non-Mortgage Accounts — https://selling-guide.fanniemae.com/sel/b3-5.3-09/du-credit-report-analysis
Why This Is the Correct Answer
D. This DU rule does not require full payment of the medical collections. Medical collections are excluded from the listed collection-balance limits. This underwriting treatment is different from deleting a credit-report entry or forgiving a debt. Scope and exceptions: Other loan requirements, accurate classification and applicable lender conditions remain relevant. Judgments, liens and merely past-due accounts have different treatment. Marking a collection Paid By Close can generate a payoff requirement in DU findings.
Why the Other Options Are Wrong
Option A: Collections under $2,000 are removed from the report on request
The cited underwriting rule does not establish automatic report removal below $2,000.
Option B: The $1,850 must be paid and seasoned for 12 months before closing
It does not impose the proposed payoff-and-12-month-seasoning requirement.
Option C: All collections must be paid in full before any loan may close
It expressly permits qualifying collections to remain unpaid.
Exam Tip
Do not confuse collection payoff rules with credit-report removal or debt cancellation.
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