Refinancing With Judgment Mortgage Lending Guidelines


This BLOG On Mortgage Guidelines On Refinancing With Judgment Was UPDATED And PUBLISHED On November 2nd, 2019

Refinancing With Judgment

Mortgage rates are still low and many homeowners have not refinanced their higher interest mortgage home loans yet.

  • Refinance Mortgage Process is the same as applying for a home purchase mortgage loan
  • By refinancing high-interest rate mortgage to a lower rate mortgage can save homeowners tens of thousands of dollars over the life of mortgage loan term
  • Monthly payments can greatly be reduced by refinancing home
  • Lenders will need to see income, credit, and liabilities
  • Having a period of prior bad credit is fine and understandable
  • Collection accounts with balances do not have to be paid, depending on the mortgage lender
  • However, refinancing with judgment or judgments, that is a different story
  • Is it possible for homeowners to do refinancing with judgment? 
  • The answer is yes but under certain circumstances

Refinancing With Judgment is possible and we will discuss ways of refinancing with judgment.

What Is A Judgment And How Is Refinancing With Judgment Possible

What Is A Judgment And How Is Refinancing With Judgment Possible

A judgment is when a judge rules in favor of the creditor plaintiff on a monetary sum owed by a debtor.

  • Consumers must properly be served for the judgment to be valid
  • The creditor will file a lawsuit with the county courthouse
  • Either the county sheriff or process server needs to serve the consumer with a summons to appear in court
  • If the defendant does not show up, the judge normally issues a judgment against in favor of the creditor
  • Defendants can show up with proof that the debt has been settled or does not belong to them
  • If the judge deems it that the creditor does not have a valid reason to warrant the collection, the judge will dismiss the lawsuit and everything is expunged
  • However, most consumers who do owe debt normally do not show up in court
  • Missing the court date, the judge will rule in favor of the plaintiff

Judgments Are Worst Derogatory

Why Judgments Are Worst Derogatory

A judgment is probably the worst derogatory item a consumer can have against on credit report.

  • A judgment remains on credit report for 7 years from the date it was entered
  • But most judgments have a statute of limitations for 10 years, depending on the state
  • Judgment creditors can renew the judgment once the statute of limitations expires in ten years for another ten years
  • Good news is that most judgment creditors do not renew dormant judgments

Creditor Enforcement Of Judgment

What does Creditor Enforcement Of Judgment mean?

If a creditor has a judgment against a defendant, the creditor can enforce the judgment by trying to place liens on assets such as home, other properties, bank accounts, investment account. Or they can even try to garnish wages.

  • However, those who do not have many assets or no assets, and no income are considered judgment proof
  • Judgment Proof means that they cannot do anything because debtors do not own anything of value
  • Once a judgment creditor has a judgment against, they can try to aggressively try to collect on the judgment
  • When they find out that debtor do not have much assets or income, they will eventually lay off
  • As the judgment ages, the collection activity will die down
  • The judgment will eventually become dormant
  • However, if the judgment creditor gets wind that debtor has assets or are making a good income, they can restart and aggressively pursue collection proceedings
  • Most judgment creditors do not renew the judgments after the statute of limitations period is over

How Can I Vacate A Judgment?

How Can I Vacate A Judgment?

There are three ways of getting rid of judgment.

  • The first and easiest guaranteed way of getting rid of a judgment is by filing Chapter 7 bankruptcy
  • Most judgments are discharged on a bankruptcy unless the judgment is from fraud or a government debt such as a tax lien or delinquent student loans
  • Child support and alimony debts cannot be discharged through bankruptcy
  • The second way of getting rid of a judgment is by paying off the judgment or entering into a written payment agreement with the judgment creditor
  • Debtors can settle for a percentage on the judgment amount owed and have the judgment creditor clear of the judgment and record it on public records as satisfied
  • The third way of getting rid of a judgment is by having it vacated by petitioning to the courts that they were not served properly

Homeowners Refinancing With Judgment

What does Homeowners Refinancing With Judgment mean?

Homeowners who have a money judgment against them, the judgment creditor can have an interest and lien against their property.

  • Money judgments are court rulings where the courts issue an interest against the property owned by the judgment debtor
  • Mortgage lenders do not want to lend on any property that has a judgment against it
  • Many lenders will require that the judgment be paid off and released in order to proceed with refinancing with judgment
  • There are other lenders that will entertain refinancing with judgment as long as the judgment debtor has a written payment agreement with the judgment creditor and has made three timely payments
  • Canceled checks and/or bank statements need to be provided

Starting Refinancing With Judgment Mortgage Process

How Starting Refinancing With Judgment Mortgage Process

Refinancing with judgment is possible:

  • However, borrowers need to discuss the judgment issue before proceeding with the processing and underwriting of refinance mortgage loan
  • Worst case scenario, borrower may need to enter into a written payment plan with the judgment creditor and make three payments to them for them to be able to proceed with refinancing
  • Gustan Cho Associates will allow judgments to be paid at closing with excess funds from a cash-out refinance mortgage

Collection Accounts Can Become Judgments

Why Collection Accounts Can Become Judgments

Another fear some mortgage lenders have is that an unsatisfied collection account can be a time bomb in turning into judgments.

  • Although under FHA guidelines, a mortgage loan applicant can qualify for a mortgage loan with unsatisfied collection accounts with credit balances, many lenders have overlays that unpaid collection accounts need to be paid in full for a mortgage loan application to proceed
  • The reason lenders have overlays on having collection accounts paid in full is due to fear in having collection accounts become judgments

Refinancing With Judgment With Lender With No Overlays

How Refinancing With Judgment With Lender With No Overlays

Homeowners refinancing with judgment do not have to pay off the outstanding judgment prior to closing. If the borrower is doing a cash-out refinance mortgage and gets proceeds that will cover the outstanding judgment, the judgment can be paid at closing. Borrowers needing to qualify for a mortgage with a direct lender with no mortgage overlays can contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at Gustan Cho Associates Mortgage Group has no overlays on FHA, VA, USDA, and Conventional Loans. We allow judgments to be paid at closing on cash-out refinance mortgage borrowers.

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