J
Janet_IHB
Guest
There's been much discussion about stated income loans, which seemed to arrive at the conclusion that every one is garbage.
Let's start-off by saying there are plenty of people who didn't make close to what they claimed on the 1003.
More than plenty. OK, way more than plenty.
Now, what about the others?
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.
Most lenders follow the mantra "it has to make sense".
It does not make sense for a blockbuster clerk to be earning $9,000/wk, so all good underwriters would have declined this file.
Underwriters also have tools at their disposal.
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.
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.
And most importantly, they have their instincts. A good underwriter will be able to judge a file in the first 5 minutes.
Are there examples of where this documentation style would be used absent fraud?
We'll start with virtually all small business people.
Add in all people in service industries who earn much of their income in tips.
Throw in all the people who have a gig on the side in addition to the 9-to-5.
I could go on, but I think those are a good start.
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.
Should guidelines be tightend?
Yes. A lot.
Can these loans be useful in the right hands?
I say yes.
Just my $.10 - soon to be $.02.
Let's start-off by saying there are plenty of people who didn't make close to what they claimed on the 1003.
More than plenty. OK, way more than plenty.
Now, what about the others?
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.
Most lenders follow the mantra "it has to make sense".
It does not make sense for a blockbuster clerk to be earning $9,000/wk, so all good underwriters would have declined this file.
Underwriters also have tools at their disposal.
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.
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.
And most importantly, they have their instincts. A good underwriter will be able to judge a file in the first 5 minutes.
Are there examples of where this documentation style would be used absent fraud?
We'll start with virtually all small business people.
Add in all people in service industries who earn much of their income in tips.
Throw in all the people who have a gig on the side in addition to the 9-to-5.
I could go on, but I think those are a good start.
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.
Should guidelines be tightend?
Yes. A lot.
Can these loans be useful in the right hands?
I say yes.
Just my $.10 - soon to be $.02.
