J
Janet_IHB
Guest
<p>There's been much discussion about stated income loans, which seemed to arrive at the conclusion that every one is garbage.</p>
<p>Let's start-off by saying there are plenty of people who didn't make close to what they claimed on the 1003.</p>
<p>More than plenty. OK, way more than plenty.</p>
<p>Now, what about the others?</p>
<p>First, I want to give props to the good underwriters in the industry. I've known plenty who were not born yesterday, and stop these things in their tracks.</p>
<p>Most lenders follow the mantra "it has to make sense".</p>
<p>It does not make sense for a blockbuster clerk to be earning $9,000/wk, so all good underwriters would have declined this file.</p>
<p>Underwriters also have tools at their disposal.</p>
<p>They can pull staggering amounts of information from data brokers (not borrower- or broker-provided), to help them to get a better handle on who this person is.</p>
<p>They also use services like Salary.com, to get an approximation of what different jobs are likely to pay in different areas of the country.</p>
<p>And most importantly, they have their instincts. A good underwriter will be able to judge a file in the first 5 minutes.</p>
<p>Are there examples of where this documentation style would be used absent fraud?</p>
<p>We'll start with virtually all small business people.</p>
<p>Add in all people in service industries who earn much of their income in tips.</p>
<p>Throw in all the people who have a gig on the side in addition to the 9-to-5.</p>
<p>I could go on, but I think those are a good start.</p>
<p>There's also been much talk about the farm worker who bought a home for $720,000 despite making only $14,000/yr. Before we make him our poster child for bad lending, let's examine what really happended. The way I understand it, there were two married couples (all working) chipping-in to make it work. I don't have all the facts, but my understanding is that the mortgage payment was less than their combined monthly income, but far greater than 50% of their income. I believe there was fraud on the part of their agent . I heard she proposed something along the lines of a buydown (funded by the agent) to get the payments more manageable, with the intent of refinancing them into something much lower. This is a bad agent and she should lose her license. She should have put them in a home in the $300,000-$500,000 range - at best. This loan should have been stopped at the door, but there could very easily have been a good loan for them to purchase a more modest property.</p>
<p>Should guidelines be tightend?</p>
<p>Yes. A lot.</p>
<p>Can these loans be useful in the right hands?</p>
<p>I say yes.</p>
<p>Just my $.10 - soon to be $.02.</p>
<p>Let's start-off by saying there are plenty of people who didn't make close to what they claimed on the 1003.</p>
<p>More than plenty. OK, way more than plenty.</p>
<p>Now, what about the others?</p>
<p>First, I want to give props to the good underwriters in the industry. I've known plenty who were not born yesterday, and stop these things in their tracks.</p>
<p>Most lenders follow the mantra "it has to make sense".</p>
<p>It does not make sense for a blockbuster clerk to be earning $9,000/wk, so all good underwriters would have declined this file.</p>
<p>Underwriters also have tools at their disposal.</p>
<p>They can pull staggering amounts of information from data brokers (not borrower- or broker-provided), to help them to get a better handle on who this person is.</p>
<p>They also use services like Salary.com, to get an approximation of what different jobs are likely to pay in different areas of the country.</p>
<p>And most importantly, they have their instincts. A good underwriter will be able to judge a file in the first 5 minutes.</p>
<p>Are there examples of where this documentation style would be used absent fraud?</p>
<p>We'll start with virtually all small business people.</p>
<p>Add in all people in service industries who earn much of their income in tips.</p>
<p>Throw in all the people who have a gig on the side in addition to the 9-to-5.</p>
<p>I could go on, but I think those are a good start.</p>
<p>There's also been much talk about the farm worker who bought a home for $720,000 despite making only $14,000/yr. Before we make him our poster child for bad lending, let's examine what really happended. The way I understand it, there were two married couples (all working) chipping-in to make it work. I don't have all the facts, but my understanding is that the mortgage payment was less than their combined monthly income, but far greater than 50% of their income. I believe there was fraud on the part of their agent . I heard she proposed something along the lines of a buydown (funded by the agent) to get the payments more manageable, with the intent of refinancing them into something much lower. This is a bad agent and she should lose her license. She should have put them in a home in the $300,000-$500,000 range - at best. This loan should have been stopped at the door, but there could very easily have been a good loan for them to purchase a more modest property.</p>
<p>Should guidelines be tightend?</p>
<p>Yes. A lot.</p>
<p>Can these loans be useful in the right hands?</p>
<p>I say yes.</p>
<p>Just my $.10 - soon to be $.02.</p>
