New Info on Stated Income Loans

A stated income loan is a mortgage where the lender does not verify the borrower’s income by looking at their pay stubs, adiposity W-2 (employee income) forms, income tax returns, or other records. Instead, borrowers are simply asked to state their income, and taken at their word. These loans are sometimes called liar loans or liars’ loans (often misspelled liar’s loans). Stated income loans were originated by Ameriquest.

Reasons for stated income loans

These loans are nominally intended for self-employed borrowers, or other borrowers who might have difficulty documenting their income. Stated income loans have been extended to customers with a wide range of credit histories, including subprime borrowers. The lack of verification makes these loans particularly simple targets for fraud.

Stated income loans fill a gap of situations which normal loan standards would not approve. For example, a standard rule is that a customer’s mortgage and other loan payments should take up no more than 45% of the person’s income. This would seem prudent for a person just owning their main home. However, a real estate investor may have multiple properties and for each may receive only a small amount more than their loan payments on each house, but end up with $200,000 in disposable income. Nevertheless, a non-stated income loan would decline this person since their debt to income ratio would not be in line. The same issue can arise with self-employed borrowers, where the bank with a fully documented loan would include the borrower’s business debt in their debt to income calculation. Stated income loans also help borrowers where fully documented loans normally would not consider the source of income as being reliable and stable, such as investors who consistently earn capital gains. Fully documented loans also do not consider potential future income increases. Another type of loan that uses the same principles is the no income disclosure loan.

In August 2006, Steven Krystofiak, president of the Mortgage Brokers Association for Responsible Lending, in a statement at a Federal Reserve hearing on mortgage regulation, reported that his organization had compared a sample of 100 stated income mortgage applications to IRS records, and found almost 60% of the sampled loans had overstated their income by more than 50 percent.

U.S. Senator Chuck Schumer is currently leading an effort to restrict stated income loans; his Borrowers Protection Act of 2007 would essentially forbid them. A few years later, Chuck Shumer’s efforts came to fruition with the Dodd-Frank Financial Reform Bill HR4173. Within the Bill, Section 1411 has the following excerpt, “A creditor making a residential mortgage loan shall verify amounts of income or assets that such creditor relies on to determine repayment ability…”,. Currently, lenders are conducting their own version of income and asset verification.

Stated income loans are still offered typically by small local banks. Qualification requirements are based on stable employment, good reserves, good FICO and no less than 40% equity position in the property. Stated income loan availability changes state to state, county to county.

Stated Income Lenders And Mortgage Loans

Who are stated income mortgage loans m?ant for? For the most part, help this loan is for the self em?loyed borrower who c?nnot document all ?f the income ?r shows a v?ry low net income on the tax return. In ad?ition, page a stated income mortgage loan ?s great for ? person who e?rns some salary but also cash that is not docum?nted anywhere. An example would be ? waiter, approved bar ten?er, valet parking atten?ant, limo driver, etc One other t?pe of borrower who may opt f?r a stated in?ome mortgage loan ?s someone who coll?cts rental income but does not h?ve signed leases to verify that in?ome stream.

Stat?d income mortgage loans are making ? slow comeback and it is ? good thing. The lending regulations ?n our opinion were over-tightened. Now, y?u have legitimate ?elf employed borrowers who cannot get ? loan. That ?s a problem which needs to be fixed. If ?ou are not ?oing to bring ?tated income loans back in Stated Income Loans full force, then the full documentation guidelines need to change for self employed borrowers. They should use the gross ?ncome (or somewhere ?bove the net) ?n the tax returns for qualification ?urposes. Salaried borrowers ?re showing gross ?ncome before tax ?eductions and so should self employed borr?wers.

A problem presented it?elf because loan modifi?ation companies were charging homeowners upfront f?es to begin working on these modific?tions. The fact ?s that too m?ny consumers were ?n financial distress and requesting modifications and certain loan modification companies did n?t have enough personnel on staff to handle all ?f their clients. As a result, th?y were unable to complete as many modifications as there were requests f?r modifications. The governm?nt of California step?ed in and wrote new loan modification regulations that stat?d it would be unlawful to char?e upfront fees ?f anyone in foreclosure requesting to chan?e the terms ?f their loan

In Florida, you ne?d to find ju?t the right pers?n who knows h?w to get the best stated income self employed loans possible. If y?u are a self-empl?yed borrower in Flor?da then you wi?l have your own set of issu?s getting a mortg?ge that other peop?e may not have. One of ?ur professional Florida mortgage specialists can help you with ?our stated income ?oan and get ?ou the house that you have ?our eye on. Don’t let the fact that you ?on’t have a W2 job and that your loan will be paid ?ff using self ?mployment fund stop ?ou from getting ?nto the home ?f your dreams.

100% LTV – r?duced documentation programs were designed by “profiling” borrower types. The t?pical profile of ? stated income a?plicant was a b?rrower with irregular income because he/she e?rned seasonal or c?mmission income, and was typically self-employed. Appl?cants were qualified u?ing their “stated “ annual income for the previous two years. Loans were underwritten and closed under this honor sy?tem, as lenders typ?cally did not verify a borrower’s st?ted earnings with the IRS. Stated in?ome was also ext?nded to wage earners at 100% LTV with FICO min?mums set as ?ow as 580. Primary, se?ond, and non-owner residence?.
Question by : Are federally-guaranteed direct student loans taxable income?
Not grants/scholarships, page but loans that must be repaid.
It seems the grant money was used to pay my tuition and required supplies (books, cure etc.) Loan money is largely what pays my room and board and extra spending money.

Best answer:

Answer by Billy
Loans are not income because as you stated they must be repaid.

What do you think? Answer below!