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Radian, the mortgage insurance company, will no longer provide insurance for stated income and stated asset loans. The loans, sometimes called “liar loans” by skeptics, allow borrowers to simply conjure their income and assets used for qualification without any due diligence checking.
This may signal the tipping-point of a major sea-change in underwriting standards. While many banks have eliminated the stated income, stated asset loans due to poor performance or otherwise, the insurance companies jumping in to the act would all but guarantee the extinction of stated/stated loans in the conventional and jumbo markets. The stated loans may end up only being available through private channels and “hard money”.
This would be a major blow to the already struggling mortgage market, where a large portion of borrowers in the bubble areas (CA, FL, NV, etc.) hold loans that they would not qualify for using traditional full income and asset documentation.
From the Market Watch story on Radian discontinuing insurance for stated income, stated asset loans:
Radian Guaranty Inc. will not insure mortgages originated under “stated income” and “stated asset” programs starting April 30, the mortgage insurer said late Thursday. “While certain forms of alternative documentation used to verify assets and income are appropriate with a disciplined underwriting process, the stated programs will no longer be insurable as a result of poor performance,” said Radian in a message to clients. Stated income mortgages are loans that don’t require documentation of a borrower’s income. Radian Guaranty is the mortgage insurance subsidiary of Radian Group .
