{"id":2596,"date":"2020-10-01T16:55:38","date_gmt":"2020-10-01T16:55:38","guid":{"rendered":"https:\/\/businessfinancenews.com\/?p=2596"},"modified":"2021-06-12T22:54:22","modified_gmt":"2021-06-12T21:54:22","slug":"stated-income-loans","status":"publish","type":"post","link":"https:\/\/businessfinancenews.com\/loans\/stated-income-loans\/","title":{"rendered":"Stated Income Loans"},"content":{"rendered":"\n

Stated Income Loans<\/strong><\/h2>\n\n\n\n

Stated income loans for mortgages were one of the many causes of the disintegration of the US housing market in 2008 (1<\/a>), called the \u201chousing bubble\u201d (2<\/a>). Therefore, in 2010, the Obama Administration passed the Dodd-Frank reform legislation (3<\/a>) which in practice prohibited to institute loans that are granted with the sole stated income declaration from the prospective borrower (4<\/a>) as the only evidence of his eligibility and ability-to-pay his obligations derived from the loan covenant (5<\/a>).<\/p>\n\n\n\n

After all the damage caused by the Dodd-Frank legislation piece to access to housing (14<\/a>), community banks, and American families (6<\/a>) (7<\/a>) who, as explained by White House (8<\/a>), were impeded access to housing (9<\/a>), the Trump Administration passed severe reforms to roll back many segments of the aforementioned legislation (12<\/a>) and to the Commercial Code (10<\/a>) that did not repeal the Act (11<\/a>), but empirically allowed the return of a variant of stated income loans (13<\/a>). Stated income loans return, however, is with the condition that this affirmation of the \u201cability to repay\u201d from the prospective homebuyer or borrower (14<\/a>) is evidenced by the submission of documents and statements issued by banks or relevant financial institutions (15<\/a>) (16<\/a>). Furthermore, the debtor of the mortgage does not occupy the property subject of the contract (17<\/a>).<\/p>\n\n\n\n

So, in a nutshell, after the rollback of the Dodd-Frank financial reform, we can define what are stated income loans nowadays like this.<\/p>\n\n\n\n

Stated income loans are a type of eligibility criteria for loan contracts wherein the borrower evidences his ability to repay the contractual obligation through the submission of documents issued by financial institutions such as bank statements. These stated income loans are suitable for self-employed subjects who cannot exhibit evidence to document their repayment ability and that have maximized their tax deductions, thus reducing their adjusted gross income and therefore, becoming less eligible to lenders.<\/strong><\/p>\n\n\n\n

As these stated income loans or now most adequately called \u201cbank statement loans\u201d<\/strong> are not conventional mortgages and thus, are offered by non-qualifying mortgage lenders, they cannot be sold to Freddie Mac or Fannie Mae, like mortgage-backed securities, what is what lenders usually perform with conventional mortgages. Freddie Mac or Fannie Mae are not originators, but purchasers of these mortgages.<\/p>\n\n\n\n

Therefore, as stated income loans cannot be easily negotiated by the lender in the secondary house market and are less interesting to underwriters, the lender must assume more risk. As a consequence thereof, expect a lower loan-to-value and a higher FICO score required to the prospective borrower.<\/p>\n\n\n\n

Of course, not all lenders offer non-qualifying mortgage lenders. Complete our form to gather information from diverse lenders that offer these mortgage loans.<\/p>\n\n\n\n

Pros And Cons Of Stated Income Loans<\/strong><\/h2>\n\n\n\n

Pros<\/strong><\/h3>\n\n\n\n