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Stated Loans are back - is there a need?

How many clients can you help with a no fico stated/verified asset 75% ltv program?  I am not talking liar loans but true stated income verified asset programs for self-employed borrowers. 
  • January 14 2009 - Southeastern Denver
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Answers (33)

Best Answer

There would be a great demand for this product.  Not a new concept this is what many portfolio lenders offered before this whole miss came about.  GW and many other S&L's offered this product for years before DIT and Verifications were relaxed and they found a market with investors in secondary for these loans.  We may even see the rebirth of the Option Arm, I still have clients looking for it.  Keep us updated will they have a wholesale division?

  • January 14 2009
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Profile picture for Chris Corica

Who picked Carls answer as the "Best" Answer? I demand a recount!

  • January 16 2009
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Carmen, no one to my knowledge offers that anymore. It's a mute point.
  • January 15 2009
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Profile picture for carmen25
what's a no ratio program?
  • January 15 2009
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Well said Chris!

  • January 15 2009
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Profile picture for Chris Corica

To use a stated loan in the mannor you are suggesting amounts to loan fraud. If the income can not be supported by tax returns you are stating a lie. If Borrower X generated $100,000 last year BUT it cost them $80,000 in expenses to get that amount, you think they should use a qualifying income of $100,000? That is exactly how we got to where we are today. If your program is not concerned with accuracy why offer stated, why not just have a no ratio program and skip all the BS? Just a thought.  

  • January 15 2009
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"True self-employed borrowers / Investors that use all of their LEGAL deductions are absolutly penalized/discrimintaed against now when being asked for tax returns." 

Really?

Let's take a small business owner and transpose them into a w'2 sales position/employee paying taxes on their income minus unreimbursed business expenses. They are still ask to provide tax returns. Are they being discriminated against as well?

  • January 15 2009
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Profile picture for Rob Cochems
carmen,

Stated is not cheap these days...
  • January 15 2009
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Profile picture for carmen25
Greg- I have tax returns that go back 6 years. As with many business owners, we write off a few things, which results in not so high net income. For the 2008 tax year, i am showing much more income but i still doubt that it will qualify for $546250.

ST- Oh no way, i would never accept 8.5% rate!
  • January 15 2009
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St, I'm speaking of Portfolio Lenders that are currently offering these products. .... You've responded to most of the comments, why haven't you responded to the purpose of this thread.?
  • January 15 2009
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ST, there has never been a stated income loan without a fico score, unless it's hard money.


Carmen, sorry but he does not care your score is 820, although we are impressed, and his rate will be 8.5%, see below. 

  • January 15 2009
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Carmen, is there a reason your tax returns would not show your income. There is no need for a stated program when you can average your last 2 years worth of returns. If your tax returns don't show an income, you don't have any.

No need to state anything.
  • January 15 2009
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ST- I totally agree with you. What would you recommend for a self-employed borrower, 820 fico, never defaulted on any payments, around $175,000 cash down payment, looking to borrow $546250 (conforming loan limit in san diego county, California), 30yr fixed, interest rate in the 4% to low 5%'s?  Is this realistic or am I dreaming? (looking to borrow in about 2 months).
  • January 15 2009
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Profile picture for stsfctn
Rudi, again this is not a Fannie mae or Freddie Mac loan so there would be no 4506T required or pulled.

And to ask a self employed borrower to redo thier taxes and pay the piper is not a realistic solution. 

True self-employed borrowers / Investors that use all of their LEGAL deductions are absolutly penalized/discrimintaed against now when being asked for tax returns. 
  • January 15 2009
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There are several SIVAs available today and a couple SISAs. Is there a need? Not when the lenders utilize the 4506T. Before, it mainly just went into the file. Now, lenders are requesting the tax returns!

For a self employed person seeking financing that wrote a substancial amount of income offf their taxes, as I see it, they need to amend their last two years and pay the piper or rethink how they are going to file in the future if they cannot qualify on their net income plus depreciation.
  • January 15 2009
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As a self-employed potential future buyer w/excellent credit and assets, I would be very interested in a stated income loan.
  • January 15 2009
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Just trying to gauge what your capacity was here.  If your company comes out with it let me know.

  • January 15 2009
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Nic,

The program is coming back - this is not a hypothetical, what the investor wants to know basically is what volume to expect the first 90 days.  Unfortunatly there is a big hang-up here in understanding the original question. - See Below.

Clay if it makes the program more believeable then we can make a 740 fico requirement for your team. 

In hindsight I should have started a discussion rather than a question. 
 
  • January 15 2009
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stsfcth--What are you trying to accomplish here?  Do you have stated loans available through your company? Or just having a hypothetical conversation?
  • January 15 2009
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Yes you are talking.  What do you want a medal?
  • January 15 2009
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sts, are you really pushing a securities based loan since no credit score and strong assets required? If so, those loans are at 4-4.5%.
  • January 14 2009
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Profile picture for stsfctn

Barry, I understand that the market is expected to drop another 15% on a national average over the next year and California is expected to drop an average of 25% in 2009. 

The market rollout has not yet been outlined and remember those figures above are averages. I would expect the market conditions would determine where these products are launched. 
If one could predict the exact bottom of the market then there would be too much competition for this product at that time. Hence the rollout - sooner than later.

It could also be a 30 year as well it is still under market testing.

Again let me better clarify the origianal question - despite your market thoughts and great secondary market questions -

How many loan applications could you generate over the next 30 days if this product was available today?



  • January 14 2009
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Well I'm with Barry. You are talking about financing investment properties with no income verification and they dont even need a credit score, but they do need a strong appraisal/assets. Barry and I are from Georgia but we really dont ride on, or fall off of, turnip trucks. If you are taking stated income you might as well say you will take proposed rental agreements too. I love the interest only twist, like it makes much difference at 8.5%. They could just start their own version of Tarp, let the investors use the 75 LTV on the purchase so no money down and they could take all the inventory of the banks, HUD, Fannie, and Freddie. 
  • January 14 2009
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Profile picture for Home Lending Pros.
Wouldn't the lender already know what the need is?
No (IO)?
Guess it is possible if the full (PI) is required.
  • January 14 2009
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Thanks for seeing the value of these again.

Clay, stop thinking about this as a property loan and think of this as a note.  Home loans are- to large financial institutions=  notes.  They buy and sell notes. Notes I am speaking of have strong appraisals at a Max 75% LTV with strong assets.  So they are not stupid they are quite smart. 

Carl you are dead on right with the S&L comparrison. 

  • January 14 2009
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Still with Clay!

Sorry- St

"Think outside the box here a little bit and I think you will agree that if there is a market need, the company that fills that need will move ahead.  We are talking 75% max LTV with a strong appraisal."

Last time I heard this,  New Century ring a bell? 

Just has not been long enough for the secondary to forget the huge losses. Strong appraisal? Using an AMC? Some declining markets are,
 well, still declining? An Investor putting this on their books at any rate are going to sell to who??

  • January 14 2009
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No " Large Financial Institution " or even a small financial institution is stupid enough to loan 75% on a stated loan with no fico, UNLESS they plan to cross collateralize those verified assets along with the property.

  • January 14 2009
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ST, I am all about bringing the SIVA/NINA loans back.  I have.....well had, a large clientelle of those borrowers.  Not one was ever put into an ARM, only 30 yr fixes.  They were dream files, easy, breezy.  Not one single one of my borrowers has defaulted.  Not one.  I really wish the government would give us a list, a breakdown of all the loan types that have defaulted.  I don't believe for a 2nd that the majority are these types of loans-SIVA/NINA's, I'm speaking about.  What should be outlawed, in my opinion are the ARMs.  How many of those adjusted to payments people couldn't afford?  Ewwww, I just get so annoyed thinking about this crap.  Take good programs from great borrowers. 

  • January 14 2009
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Come on Tammy, I am just asking if there is a demand from the mortgage broker community. I am not sending out a company logo and pushing a hard money loan here.  It is about finding solutions.  What would you do if one of your past investor clients came to you who have 6 rental properties and their ARM is going to adjust on one of thier properties?  How would you advise them?  Sell?? 

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No we are not talking 15%. I was approached by a very large financial institution that will be rolling out a Stated/Verified program; they want to know how much of a need there is for this program.

For the loan officers that have less than 4 years experience will agree the subprime mess destroyed the stated loan programs. Think outside the box here a little bit and I think you will agree that if there is a market need, the company that fills that need will move ahead.  We are talking 75% max LTV with a strong appraisal. 

I am assuming the rates would be around an 8.5 on a 3/1 arm with an IO option.  This would also help the borrowers/investors you have that have more than 4 properties because this would NOT be a Fannnie or Freddie loan. 

  • January 14 2009
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