How Many Stated Loans Are There?

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Many people have asked me to comment on how many (or better, what percentage) of the loans underwritten out there are stated income loans. My default answer has been "It’s difficult to tell." due to the manual work required to get in to a file to determine if a stated income program was used. We may finally have some numbers to work from. In a recent LA Times article:

Increasingly, lenders approved sub-prime loans with little or no proof of income. These "stated-income" loans comprised 39% of sub-prime loans last year, up from 26% in 2000, according to the Center for Responsible Lending, an advocacy group for borrowers.

If we take that number, 39% and use some rough judgments about what we know to be true about the alt-a and prime mortgage markets – primarily the fact that a majority of these borrowers used exotic mortgages as financing – then we can assume, safely, that the number of stated income loans for these borrower groups is significantly higher than 39%.

If I were to guess I’d put the number at almost half of all originations in 2006. As I’ve said before, your mortgage payment isn’t paid by your FICO score, and your score can’t help you when your exotic mortgage recasts to a full payment loan.