defaulted auto loan she co-signed

Below is your required info for my question:

1. auto loan in another state co-signed with ex-husband 3/22/1999
2. 30 payments made on account b4 sent to collections
3. last payment was made on 12/22/2001
4. her credit score is 636

Situation:

My wife was previously married and co-signed with her the-husband for a auto loan. She was not employed but a house wife. Her ex defaulted on the loan and the car was repossessed. She divorced him after he was arrested as a sex offender. She moved away and eventually met me and we have been married for going on 2 years. The collector has contacted her to collect on the deficiency balance. We know that the statutes of limitations expired on her last payment on 01/01/2002. The state of BAH HAH where the contract was signed, the SOL, is 4 years from date of last activity. She nor her ex have paid anything since the last payment on 01/01/2002. She only has three things on her credit record:
1. defaulted auto loan she co-signed
2. untility bill not paid by her husband who was the only worker, but in her name,dated 01//2000
3. a personal loan she was able to get last year that was paid off yesterday after 7 months of perfect payment history.

The collector is saying they can satisfy her part of the debt with a settlement yet to be determined. The unsettled repossession is keeping us from getting a mortgage and the collector will probably never see any settlement with her ex who is flying under the radar( but she has his contact info due to child support). The collector claims that she can satisfy "her" part of the debt and report that to the CB's as her part paid. What are your "recommendations".

Thanks,
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Well 636 is just under the great rate score of 640.
A 636 is rety decent though and in most cases would quailfy a person for a
decent interst rate if you have enough "rated trade lines" or open credit
accounts. Looks like you only have one.
It also sounds like the mortgage company would buy your paper IF this repo was
satisfied.
Recommendations?
Depends on a lot of what if's. If the settlent is something you can pay And if you pay, you will get the mortgage at the rate you expect. Then pay it and get your mortgage fast.
If the amount can be paid but you aren't SURE if you will be approved or what rate you will get, I would advise to leave it alone until it falls of. It is 4 years old now. 3 more and it is gone.
You must realize if you pay and they mark it paid your date will change to 2006 which might even lower your score. This would be no problem if all you want is a mortgage and YOU ARE SURE you will get the mortgage if you pay.
If the amount is too much to pay I would adivise looking for owner financing. Get everything in writing as far as when you pay it off you get a deed. I advise paying a lawyer to prtect your interest on any owner financing.