No paystub, no credit score, no problem
- Thread starter momopi
- Start date
NEW -> Contingent Buyer Assistance Program
As soon as that happens, it's time to sell all your real estate and wait for the next meltdown.
So you think that'll prevent liar loans in the future?
This is true, my 7/1 ARM loan was underwritten using the actual rate that the loan would have reset to today (3.375% vs. 2.625%) so basically I was underwritten to a 30-year rate in my case.
As the demand for yield grows and people forget what happened in 2007-2009, these "niche" loans will become more and more common. As the saying goes...old habits die hard. That being said, maybe I should work on getting a JD for the upcoming lawsuits. haha
sgip
Well-known member
Yes, on the one hand loose documentation rules are stupid.
On the other hand, the article does not say that W-2's will no longer be required. It's reasonable to take a 2014-2015 W-2 income stream, plus a 2016 Employer provided Verification of Employment form to approximate income. Besides, if borrower A says they make $10,000 per month at Subway, and the manager at Subway completes the Verification of Employment saying $10,000 per month, the borrowers bank statements better show $10,000 per month flowing into them, or the deal is off.
This data change, plus the FICO changes will apply to a very small number of customers. It's the Agencies now allowing the camels nose into the tent that's the stupid part of it all. Pretty soon, we're back to 2005 underwriting standards. We all know how well that worked out.
My .02c
SGIP
On the other hand, the article does not say that W-2's will no longer be required. It's reasonable to take a 2014-2015 W-2 income stream, plus a 2016 Employer provided Verification of Employment form to approximate income. Besides, if borrower A says they make $10,000 per month at Subway, and the manager at Subway completes the Verification of Employment saying $10,000 per month, the borrowers bank statements better show $10,000 per month flowing into them, or the deal is off.
This data change, plus the FICO changes will apply to a very small number of customers. It's the Agencies now allowing the camels nose into the tent that's the stupid part of it all. Pretty soon, we're back to 2005 underwriting standards. We all know how well that worked out.
My .02c
SGIP
Perspective
Well-known member
The Ability to Repay (ATR) rules requiring creditors consider and verify the borrower's ability to repay the mortgage have prevented this, so far. The further creditors stray from the Qualified Mortgage (QM) standard, the more likely defaults will increase; and with every single one, an ATR private right of action claim that the creditor failed to comply. If the loan isn't a QM, the burden is shifted to the creditor to prove they considered and verified the borrower's ability to repay the loan.
usctrojancpa
Well-known member
Soylent Green Is People said:
As soon as that happens, it's time to sell all your real estate and wait for the next meltdown.
Perspective
Well-known member
Every investor and creditor has been exploring if and how to enter the non-QM space, even before ATR became effective in 2014. There's a reason few have entered, and the ones who have, are treading very lightly. There's too much risk.
http://www.consumerfinance.gov/poli...andards-under-truth-lending-act-regulation-z/
http://www.consumerfinance.gov/poli...andards-under-truth-lending-act-regulation-z/
Perspective
Well-known member
In a nutshell, prior to January 10th, 2014, if a lender made a mortgage loan that a borrower couldn?t afford to pay back, there was no legal recourse. A borrower couldn?t file a lawsuit complaining that the mortgage couldn?t reasonably be repaid. There was no federal law against making mortgages to borrowers regardless of the borrower?s ability to repay the mortgage. Now there is.
usctrojancpa
Well-known member
Perspective said:
So you think that'll prevent liar loans in the future?
Perspective
Well-known member
Liar loans are dead. ATR killed them. If you make a residential mortgage loan without considering and verifying the borrower?s reasonable ability to repay it, that borrower can sue you within three years of origination or at any point in the loan?s life if it enters default. The borrower can recover statutory damages of three years? finance charges and fees, actual damages, court costs, and attorney?s fees.
Assignee liability exists here too. So these damages will be paid by the owner(s) of the mortgage at the time of the suit. These liar loans, or NINJA loans (no job, no income, no assets need be proved), will not be made because no investor will buy them. Additionally, if the loan doesn?t meet the QM standard, it doesn?t qualify as a QRM. If it?s securitized, the aggregator must retain a 5% risk in the MBS.
In addition to ATR requiring creditors consider and verify your real income and assets, creditors must also use the real payment to qualify you for the mortgage loan in order to qualify the loan as a QM. This nearly eliminates all of the toxic products from the bubble run-up that allowed borrowers to qualify for the payment that existed for the first year or so (teaser rates, option-ARMs, balloon payments, etc.). Even in a basic ARM loan, the creditor must qualify you based on the payment calculated on the fully-indexed rate (the index at the time of origination + the max margin adjustment within the first five years).
Assignee liability exists here too. So these damages will be paid by the owner(s) of the mortgage at the time of the suit. These liar loans, or NINJA loans (no job, no income, no assets need be proved), will not be made because no investor will buy them. Additionally, if the loan doesn?t meet the QM standard, it doesn?t qualify as a QRM. If it?s securitized, the aggregator must retain a 5% risk in the MBS.
In addition to ATR requiring creditors consider and verify your real income and assets, creditors must also use the real payment to qualify you for the mortgage loan in order to qualify the loan as a QM. This nearly eliminates all of the toxic products from the bubble run-up that allowed borrowers to qualify for the payment that existed for the first year or so (teaser rates, option-ARMs, balloon payments, etc.). Even in a basic ARM loan, the creditor must qualify you based on the payment calculated on the fully-indexed rate (the index at the time of origination + the max margin adjustment within the first five years).
Perspective
Well-known member
There's a reason why Dodd-Frank, and specifically the ATR portion, has been relentlessly attacked. It's because ATR has been so effective in eliminating bad, but temporarily profitable, mortgage lending.
usctrojancpa
Well-known member
Perspective said:
This is true, my 7/1 ARM loan was underwritten using the actual rate that the loan would have reset to today (3.375% vs. 2.625%) so basically I was underwritten to a 30-year rate in my case.
sgip
Well-known member
Most of the advertised "stated income" "alt doc" loans have such high yields that some Hedgies are willing to take the risk on funding non-QM deals. Assuming the lifespan of these loans to be about 2-3 years at best, why not? They do look at ATR - Ability To Repay - by asking for 12-24 months of bank statements, but not much else. What do you get for so called "Common Sense Lending"? Why not look at CashCall's rate sheet here:
https://www.cashcallmortgage.com/RatesPDF.aspx
Assuming 65% LTV their 5/1 ARM starts at 4.99% for 1.0 point. From there, you might need to add .75 to rate for "Alt Docs" assuming ratios are above 43%
Yuuuge down payment, rough loan terms, high fees.... Where do I sign up! It's OC Real Estate, so I'll make it back later once I refinance!
My .02c
https://www.cashcallmortgage.com/RatesPDF.aspx
Assuming 65% LTV their 5/1 ARM starts at 4.99% for 1.0 point. From there, you might need to add .75 to rate for "Alt Docs" assuming ratios are above 43%
Yuuuge down payment, rough loan terms, high fees.... Where do I sign up! It's OC Real Estate, so I'll make it back later once I refinance!
My .02c
Perspective
Well-known member
I guess the investors think the premium charged covers the excess risk. We'll see. The scariest part here, is that any borrower who obtains this type of mortgage loan can file a complaint at any point within the first three years. The creditor has the burden to prove the borrower had the ability to repay the loan, and that the creditor sufficiently considered and verified this ability.
Considering how far these loans fall from QM standards and from Appendix Q requirements, it would seem a tall task for the creditor to meet its burden of proof. So, the borrower will receive all finance charges and fees (which includes interest paid to date) plus other statutory damages and attorneys' fees.
If these become more popular than just a tiny niche product, you can already see the commercials from plaintiff's firms:
"Did your lender make a high rate loan to you? Did they look at anything other than your bank statements? I don't care if you're having trouble paying your mortgage or not. Call me today and I'll fight for you! You may be entitled to up to three years of interest and fees returned to you plus other damages!"
Considering how far these loans fall from QM standards and from Appendix Q requirements, it would seem a tall task for the creditor to meet its burden of proof. So, the borrower will receive all finance charges and fees (which includes interest paid to date) plus other statutory damages and attorneys' fees.
If these become more popular than just a tiny niche product, you can already see the commercials from plaintiff's firms:
"Did your lender make a high rate loan to you? Did they look at anything other than your bank statements? I don't care if you're having trouble paying your mortgage or not. Call me today and I'll fight for you! You may be entitled to up to three years of interest and fees returned to you plus other damages!"
usctrojancpa
Well-known member
Perspective said:
As the demand for yield grows and people forget what happened in 2007-2009, these "niche" loans will become more and more common. As the saying goes...old habits die hard. That being said, maybe I should work on getting a JD for the upcoming lawsuits. haha