There is so much bad publicity associated with these no-doc loans. So, are any of you guys avoiding these types of loans to avoid the bad press? If so, how has it affected your business?

http://origin.insidebayarea.com/argus/localnews/ci_5412059

http://sanjose.bizjournals.com/sanjose/stories/2007/02/19/story2.html

You link is to a blank page! Why avoid no-doc loans? There are situations where no-docs are appropiate.

It's the stated income/asset loans that are not performing. The no docs are not showing signs of trouble.

Personally I HATE stateds.

I love no docs. Those are appraisal/FICO driven, nobody is tempted to lie about anything, the lender reviews the credit history and the property and decides if it's worth the risk of having no info about income/assets.

I wish people would understand that no doc and stated are NOT the same thing.

For borrowers with a lot of income from various sources such as investments, no doc can be a good way to go just to avoid the hassles and paperwork. Borrower will pay a little more for the loan but not usually oppressively more.

Here is the chain of "risk" for a lender.

Full Doc- Everything is verified (income, assets, employment, credit, equity

Stated Income- Income is stated on the application but not verified everything else is verified by the lender

SISA Stated income Stated Asset- Income and assets are stated on the application but not verified, everything else is verified

No Ratio: MY FAVORITE Income is not disclosed therefore there aren't any debt to income ratio's to consider, however sufficient asset reserves must be disclosed and verified

NINA- Income and Assets are not disclosed on the application, no figure is entered on the application. If there isn't a number on there then the lender is making the determination based on Employment, credit history and equity or amount of down payment

NO DOC Income Assets and EMployment are not disclosed. Higher rates obviously because the only thing to verify is credit history and property as the Diva mentioned.

Look at No Ratio loans to be utilized more as there is no incentive to inflate the numbers as there are on stated loans.

Stated income loans are for people who actually make the money but may have multiple businesses and investments, excellent credit and do not want to take the time to pull all of this years paperwork together to get a mortgage.

If they do not make sufficient money to qualify and you counsel them to "state" that they do its loan fraud and you can go to jail with them if they get caught! And they are working diligently to catch people in that trap. I had a client who lied and got caught and they had to pay the taxes on the income they "stated" or the loan would have foreclosed. Fortunately their mother was able to lend them $18,000 to pay it.

Paying the taxes on income you stated???? Most of my clients who do stated income do so because of their ability to take advantage of each and every "legal" tax loophole. The taxes don't come up to the stated income amount but that doesn't mean they didn't earn that amount.

real estate investors can go years without taxable income it just depends on how good their CPA is.

Take a look at some california deals in recent years, there are several places where an owner occupied homeowner could have made $200K - $300K in a short period, If they live in the house long enough to avoid capital gains taxes they could "earn a substantial income" That is income that can be "stated"

Danny

These loans were intend to benefit all different types of borrowers. Unfortunately, as of late, at least in California. Unscrupulous borrowers and brokers ruin it for the rest of us.

A little birdie told me new legislation is in the works.

Same in Ohio. I know many people will start to jump on me. But I feel it needs to go back to the day's of my parents where you HAD to have 20% down to buy a house. I hate it when people want to make an offer on a property and want the seller to pay closing and all that crap. I have told my buyers many times " yes well will write it in the contract, but if i were the seller there is NO way I would do it. I don;t know why it bothers me, but Iguess I see it as a way for people to get what they can't afford. Then get mad at the agent b/c they let them buy it!!

There is one important requirement which could be added to all stated income loans and that would be tax returns....now would'nt that have the liars biting their tongues.

AMEN to that Calif Dreaming

Bumping. Are there any no doc, stated income loans left? I have a buyer who owns a 250K home free and clear, wants to downsize and either rent out or sell the above home, taking an equity loan against home A and use to purchase home B. FICO is 700+, income is probably not wonderful.

She's been turned down by about 10 different places in the last week. Are we SOL?

I can pretty much safely assume that the nation's mortgage market is in the gutter. The prices are still dropping.

Most conventional lenders are sticking fully doct.

That would be called a 4506-T just about every lender that has stated income programs require them. So that is already in place.

While there has been plenty of abuse of stated loans an outright ban on them by many states has taken millions of small business owners out of the housing market. Business owners who legally show little income by using existing tax laws should not be punished for the abuses of a few. There is rumor that FNMA and Freddic Mac are going to take the stated income or reduced doc loans out of their offerings altogether and soon.

Unless the tax return is obtained from the government it can just be one more falsified document the buyer has produced to try to qualify for something he can't afford. It is easier for a buyer to fill out a bogus 1040, including schedule C, than it is to get bank statements or payroll stubs!

At least if it comes from the government he is less likely, though still possible, to have falsified information. Usually for filing with the government a dishonest person would try to hide income and if caught would face stiffer consequences. For borrowing they would be more likely to falsify to show more than actual income.

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Mr. Foreclosure,
A 4506-T that is now required on all stated loans is a request signed by the borrower that allows the lender to verfiy tax records directly from the IRS.
Most lenders can obtain this information in 48 hours or less.
In most cases they do not bother to pull records unless the loan defaults and if I have a borrower that refuses to sign one I know that the loan is not worth doing as I will not be party to fraud.