Comments on: You Can Go Stated as Long as Your Not ‘Industry’

By: Roger

Roger — Tue, 27 Jan 2009 02:41:44 +0000

There are a select few out there who will still do it on a jumbo basis but nowhere near what they were a year ago. Such a shame because these loans worked when it was 75% or 70%. I am talking about SIVA, the SISA is just ridiculous and unresponsible.

By: Roger

Roger — Tue, 27 Jan 2009 01:41:44 +0000

By: ROBERT EVANS

ROBERT EVANS — Fri, 19 Dec 2008 19:06:08 +0000

DO YOU HAVE ANY DIRECT LENDERS THAT WILL STILL DO SIVA LOANS.

By: Angelo

Angelo — Wed, 30 Jan 2008 03:13:01 +0000

Morgan:

1. How widespread are stated income loans now? I was under the impression that they are very hard to come by nowadays.

2. “While it will be difficult for self-employed folks to qualify for a loan banks will need to ‘invent’ a more responsible product that can fill the needs of the self-employed mortgage borrower without exposing itself to the massive fraud that stated income perpetuated across the entire industry.” I don’t think anything special need be done for the self-employed. If they generate an income stream sufficient to service a given mortgage, they should be able to back it up with TAX RETURNS. If they are not paying their taxes, I don’t think the mortgage industry should go out of its way to abet tax evasion. Can anyone explain to me why a self-employed borrower who is reporting all their income needs a stated income loan? And, if they are ALL THAT, then they should pay cash.

By: Tom Vanderwell

Tom Vanderwell — Wed, 30 Jan 2008 02:54:11 +0000

Sven,

I agree with what you say completely. I have done numerous loans for people who say they “make” $300K, but after expenses of $200,000, they only really make $100,000. Ho0wever, with good credit and a good LTV, DU and LP will quite often still make something like that work.

Get rid of the stated income loans, it won’t hurt my business at all. Let me count how many stated income deals I’ve done in the last two years….

One

Two
………..

Oh, that’s it. I can give up one loan a year for the good of the industry.

Tom

By: Sven

Sven — Tue, 29 Jan 2008 22:20:06 +0000

The way the mortgage industry lets us compute income from tax returns (ignoring capital losses/loss carry-forwards & adding back non-cash write-offs like depreciation, depletion, amortization & section 179), coupled with the fact that DU/LP still routinely approve 65 DTI’s means that there’s virtually no legitimate reason a self-employed person shouldn’t be able to qualify based upon the income they show on their tax returns. Reduced-doc loans generally just help people who cheat on their taxes. Yes, I said CHEAT. If the expenses were legitimate, then you didn’t really make that much income. If the expenses were exaggerated on your 1040’s, then you cheated. The Fed and/or congress should require documentation of borrower’s reasonable ability to pay, in part because it will reduce the chance of future mortgage crises (wth waitresses getting $600k loans), but also because the existence of reduced-doc loans encourages tax fraud. Just as the FBI tracking large cash bank deposits (of $10k or more) helps track down drug dealers, so eliminating reduced doc loans would force more people to file accurate tax returns if they have any hope of ever borrowing money.

By: Cory

Cory — Tue, 29 Jan 2008 20:16:57 +0000

In my humble opinion, the method of accommodating self-employed borrowers while meeting the requirements of the lender to extend credit would be the ability to use the gross amount on the borrower’s 1040’s (or a percentage thereof) and exclude the Schedule C altogether. I’ve had many Schedule C’s that were worthless for going Full Doc because the way the CPA structured and recorded items, it was good for the borrower to reduce their taxes, but absolutely killed their adjusted gross income because nothing to near-nothing could be added back in.

By: Sensible Lender

Sensible Lender — Tue, 29 Jan 2008 17:37:14 +0000

I know a California bank where mortgage people can get a stated income loan at a great rate. SIVA to $2 million, SISA or NINA to $1.1 mil loan amount. Got to have good equity, reserves and credit of 680 to 720. 10/1 IO rate is 5.625% at 1pt. Just drive down a major street in Calif, and stop at a few banks and you will find this within an hour.

By: Tom

Tom — Tue, 29 Jan 2008 16:47:28 +0000

Loan buy-backs were the principal reason so many originators went BK during the beginning of the 2007 mortgage banker implode-a-thon. Wall Street finally figured out FPD’s and EPD’s, had their in-house lawyers look at the rep & warranty section of the purchase contract and said “buy this crap back”. When rumors began to spread about the size of the buy-backs facing undercapitalized originators, warehouse lines were shut off and an industry liquidity crisis was now added onto a loan quality mess. The originators couldn’t buy the loans back from Wall Street because they had no cash – their warehouse lines were just snapped shut.

If originators pump out lousy loans, why should anyone buy or finance them? The only way to convince lenders/purchasers that loan quality matters is to produce based on the rep & warrant – and set aside reserves for buy-backs. Investors will venture back to the mortgage/asset backed market IF they perceive value. Much higher yield spreads are needed to get investors to buy non-agency MBS, with tighter u/w standards and originators with skin in the game. Maybe the originator buys the first loss piece?

By: Florida commercial real estate

Florida commercial real estate — Tue, 29 Jan 2008 13:59:59 +0000

I saw a blog yesterday that a married couple were going to buy a home and only using wife income as the husband self employed and they did not want to get declined due to current red tape in the mortgage process.

I had never heard of the term “stated income” but I guess always understood the process and I think it was very customary at one time. I think alot will change after the ARM situation.