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Thursday, July 27, 2006

"Stated Income" Loans = Liar Loans?

And Paul Moulo has this from National Mortgage News:

"According to a new report by the Mortgage Asset Research Institute, "stated-income loans" deserve their nickname of the "liar's loan." MARI says that almost 60% of the stated-income amounts are exaggerated by more than 50%."

Is this for real? Does this suggest that nearly 60% of those borrowers who "stated" that their income was $8000/mo., really made $4000/mo.?
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11 comments:

christiangustafson said...

You mean $6000/mo, don't you?

Hope the banks and Feds are supertough on this fraud. A mortgage leaves quite a paper trail.

Anonymous said...

Don't most lenders require a paystub?

richard said...

Is there any other way to get a home loan when you deal drugs or otherwise make your living in the black market?

Don't all americans have the right to experience the dream of homeownership?

The Tim said...

As christiangustafson said, to exaggerate a $4,000/mo. income by 50% would be to state an income of $6,000/mo.


$4,000 + ($4,000 * 50%) = $6,000

S- Crow said...

True, true fellas. It does say MORE than 50%. LOL.

darth_s said...

A quite interesting article about the “evolving view of the housing market”

http://globaleconomicanalysis.blogspot.com/2006/07/lights-out-in-georgia.html

Again, it reminds me of the irrational exuberance – job is too strong… demand is too high… inventory is too tight…

Peckhammer said...
This comment has been removed by a blog administrator.
jcricket said...

I've never quite understood how the whole concept of a "stated income" loan came about.

I understand that those with income in commission-only jobs don't have the same kind of documentation (pay stubs can't show the "run-rate"), but they still have some documentation. A couple of years of W2s should suffice.

If banks want to loan to more people, why not just up the loan-to-income percentage or your "risk tolerance" if you're a bank?

realistic realtor said...

People can make-up any amount with stated-income, but don't they need to provide tax returns to at least verify past income?

I'm buying another place and will have to go stated-income (first time) and the LOs I've spoken with all want tax returns. So maybe they are starting to crack down on these by asking for the tax returns.

S- Crow said...

Realistic Realtor-

You are correct. In stated income loan products, including no or low documentation loans, you have nothing to verify other than perhaps your job, FICO credit score and pulse/respiration rate.

When we close these transactions, the borrower does sign a form to affirm that the information is correct to the best of their knowledge. Additionally, most lenders have them fill out a IRS form that states they can be audited to square up what they say vs. actual IRS returns.

Does this reduce fraud? Probably not.

A full doc loan gets you the best possible rate and fee structure, but for some it's a drag to provide all the information.

Anonymous said...

You would be surprised at the number of "Fry Technicians" at Mc D's make a six digit income.......at least judging by the loan applications I'm seeing these days.