Q&A: Will the new rules by the FED mean no more stated income loans?

Posted on Sep 30, 2012 in Stated Income Loans

Question by nathan.pitchford: Do ALL FHA loans require mortgage insurance?
I’m looking into refinancing my home to get out of an adjustable rate and I’ve received two good faith estimates. Both for FHA loans. It’s a 95% loan and one company says they can get me the loan without mortgage insurance and the other says it’s a requirement.
Well I’m being assured that this FHA loan doesn’t have any PMI on it and it’s 95%. I even referenced the fhaloan.com site and he said he is 100% sure no MI. Any ideas?

Best answer:

Answer by Mortgageman
The loan will have mortgage insurance. You can take a higher interest rate and have the lender pay it up front. Or you can add it to your loan amount and finance it over the life of the loan. Or you can pay it monthly with your mortgage payment and petition to have it removed once you think you have 20% equity.

Know better? Leave your own answer in the comments!

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Question by jjohnson5677: Will the new rules by the FED mean no more stated income loans?
I just read a report about the FED making new guidelines for mortgage lenders. One of the details was that buyers would have to show proof of income. Does this mean no more stated income loans? IF so, no rx how long before this becomes law?

Best answer:

Answer by golferwhoworks
it will happen when lenders adopt it. Best answer I can give you. So self employed are going to be hurting one way or another

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One Comment

  1. I’ve been trying to figure this out myself, and from what I can see, the original proposed rules were for subprime borrowers, and some ALT-A borrowers (better credit but stated income, low doc, etc.) The reason the ALT-A borrowers were included was the Fed was concerned that some subprime borrowers would be re-classified as ALT-A by lenders trying to get the loan done. So how would the Fed determine if the loan was a Subprime or ALT-A loan requiring regulation? If the rate is 3 points (3%) above Treasury Rates, it would qualify. These proposed rules came out several months ago, and there was comment by consumer groups as well as lenders. Consumer groups wanted *all* loans to include income verification. Lenders said that including ALT-A borrowers in the rules would limit credit (we’re already in a credit crunch with some borrowers, so let’s just add more of them!) Based on the new comments, it looks like some, if not all, ALT-A borrowers will be covered by the new rules, which will be released in detail next week. I’m anxiously waiting to find out which borrowers will be covered by the rules myself. If all ALT-A borrowers are covered, then it’s going to be even harder to unload all the houses on the market because *many* borrowers with outstanding credit need to use low-documentation loans for a variety of reasons, including being self-employed. Lets keep our fingers crossed on this one, because it really does not seem fair that a person who is very conservative with their finances, has an 800 credit score, etc, would not be able to buy a home because they don’t meet the debt to income ration requirements and are no longer permitted to go “no income verification.”

    As far as when they will take effect, I’m assuming immediately, since the Fed does not have to go through Congress to get their rules passed. It’s their job to regulate banks, and this would fall under that catagory. I’m not sure, but I’m guessing all loans in the pipeline (not yet closed) will be covered under these rules. This is just an educated guess, though. So it’s going to be very touch-and-go for some borrowers in the coming weeks. Sorry I can’t give you better news right now.