Comments on: Wells Fargo Considering Eliminating Stated Income

By: elaine

elaine — Sat, 01 Mar 2008 13:49:10 +0000

My father is self employed and has been for over 30 years and if it wasn’t for a stated income loan which was originally specified for small business owners, etc., he would not have been able own his own home. The fact that the mortgage companies are looking to dissolve this altogether is outrageous. They were frivolous with giving these loans out to anyone who wanted one and didn’t mind paying a couple of extra dollars for the convenience of not having to provide employment information and so on. America prides itself on being a nation of individual enterprise and entrepreneurs. These hard-working people such as my father would have a much more difficult time achieving a loan for their particular situation. What the loan companies should have done is investigated the term “self employment” before they gave these loans out to every Tom, Dick, and Harry.

By: Tom Vanderwell

Tom Vanderwell — Thu, 15 Nov 2007 01:18:11 +0000

What percentage of the people who have gone stated would be “legitimate” ones? 2%? If LO’s are willing to work and document and customers are willing to generate the documentation, there are very very few people who can’t provide the documentation needed to show what they really make. Not what they think they make, or what they’d like to make, but what they really make.

By: Morgan Brown

Morgan Brown — Wed, 14 Nov 2007 19:16:46 +0000

Stated for seconds disappearing is nothing new, I agree. It’s the fact that the banks are thinking about eliminating it across the boards does not bode well for the housing market.

Russ, I agree with you. Portfolio lenders are much more inclined to look at the big picture as opposed to can it be sold.

While most of the stated deals are BS, there are some legitimate ones that will suffer as a result…

By: Top Producer

Top Producer — Wed, 14 Nov 2007 15:11:26 +0000

The Siva product is intended for the s/e borrower that have reserve and assets to back up the loan they are getting, not for salary employed borrower working 40 hrs with limited potiential to make more money to pay back the loan. Therefore big banks have to go back to common sense underwriting. Remember the 700+ score with an annual income of $40,000 is not going to be able to pay for a $350,000 home. I had a Doctor who owns his business go stated and the underwriter requested two month bank statement,because they didn’t believe $8,000 per month,yet we made a loan to a landscaping owner making $10,000 per month. At the end we provided bank statement supporting the doctor’s income to close the loan,but then is not a stated anymore.

By: Top Producer

Top Producer — Wed, 14 Nov 2007 14:53:20 +0000

It look like big banks will eliminated the SIVA for now, but when the market corrects in 2009 they will be back. The decline in market value will force banks to adjust programs to make full doc loans to avoid buying back any stated from Fannie or Freddie.

By: Bryant Keefe

Bryant Keefe — Wed, 14 Nov 2007 14:44:42 +0000

Look out…The sky is falling! I am writing this reply from the office in the home I bought utilizing “stated income” financing. It has been 2 years and I have made every payment on time. Gold Star please! In fact both my first and second are current(I used 80/20 to keep all my cash in reserves). I had to go “stated” since I have legally deductible business expenses, depreciation on income properties, and the occasional capital gain. I chose to stop writing off business expenses last year and this year so I may continue to invest in Real Estate. So now I must pay more of my income to taxes but I can now buy homes with “full” income documentation. This sucks actually. I like write offs and I like minimizing my tax burden but the markets have forced me to bite the bullet and waste money on our government. Don’t get me started on that topic.

What we need is “common sense” in the underwriting arena. I know what people earn. I have seen enough applications from enough professions to know what is real and what is fallacy. It is not that tough. I drive off lots in expensive cars and my income is never “verified”. I get credit all the time with my credit report, stated (real not fantasy) income, collateral and my signature. It ain’t that tough folks.

Chase stopped Stated Income a few weeks ago and they required a 740 FICO on their product. First payment defaults per my AE.

Stop LYING (consumers of course since LO’s do not “suggest” income levels to their clients to get loans funded) on applications and this will work itself out.

Good topic and I expect all non automated stated/no ratio to be gone real soon. Get me a hard hat because the sky actually is falling.

By: DANI

DANI — Wed, 14 Nov 2007 14:41:52 +0000

countrywide wont be a round in 5 years

By: Ron Bergam

Ron Bergam — Wed, 14 Nov 2007 14:16:02 +0000

Ummm…actually the lifespan of a 4506 is 60 days after funding. After that the investor cannot pull a tax return. Major lenders sometimes don’t get through teir QC process before the 4506 is useless, so their is no way 4506’s are going to be the demise of CFC on the PO Arms. CFC doesn’t have the same buyback provisions as a company such as an AHM (which contributed to their downfall).

So in short although the entire industry played the “stated”
game, as the non-performing loans play out of the system the market will normalize.

I also seriously doubt that any of the big players will completely give up the fast and easy’s, Mtg express, etc. they will only underwrite them more stringently and up the reasonableness tests.

By: Fielding Mellish

Fielding Mellish — Wed, 14 Nov 2007 05:34:10 +0000

A problem with Stated Income loans is that they commonly contain a borrower-signed IRS form 4506 that allows an auditor to pull the borrower’s tax returns directly from the IRS. If the loan goes bad for ANY reason, any discrepancy between the stated income & the income on the borrower’s tax returns means the loan can be labeled FRAUD. That’s why I think Countrywide’s head is already in the guillotine & the blade is already falling. Almost half of their servicing portfolio in California & Florida is Option ARMs. The vast majority of them were (bogus) Stated Income. When these loans start to re-cast in late 2008-2011 (payments almost doubling), many of the Option ARMs will go bad and Countrywide will face repurchase demands from their investors. The reason will be the fraud unearthed by use of the 4506’s. Countrywide could quickly become insolvent. Anyone buying CFC stock right now does not have a full understanding of how these loans work, how they were underwritten and the fact that, when it comes to fraud, Countrywide is on the hook (subject to repurchase demands) for these loans for their entire duration.

By: nat

nat — Wed, 14 Nov 2007 02:53:17 +0000

nat city wholesale cut out sisa agency conforming – are they too conservitive or ahead of the curve?
Less loans but no buybacks? vs writing bad loans and the chance fannie doesnt buy them?