What this task is
This task collects documentation confirming that a liability has been paid off or materially paid down from its prior balance. The key objective is to show that the current outstanding balance and monthly payment used in underwriting match the borrower’s true post-payoff obligation.When this task is required
This task is required when:- A liability is flagged with an exclusion reason such as “Paid Before Closing” or similar, and
- The underwriter plans to remove or reduce the liability from the borrower’s qualifying obligations based on a payoff or principal reduction.
- Paying off a credit card, personal loan, or auto loan before or at closing.
- Reducing a balance to a point where guidelines treat the debt differently (for example, an installment loan with only a few payments remaining).
Why this task is required
Lenders must avoid understating the borrower’s obligations. Proof that the liability has been paid off or paid down ensures:- The current balance and payment used for DTI are accurate.
- Any planned payoff at or before closing is properly documented and executed.
- The loan complies with agency, investor, and internal policy regarding treatment of recently paid debts.
- Include the full prior payment in DTI, or
- Delay closing until acceptable proof is provided.
Documents needed to resolve this task
To satisfy this task, provide:- Evidence of payoff or reduction, such as:
- A paid-in-full letter,
- A final account statement showing a zero balance, or
- An updated statement reflecting the new, lower balance and payment.
- If the payoff or paydown was recently made, also provide:
- Proof of the payment transaction, such as bank statements, wire confirmations, or receipts showing amount, date, and payee.