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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.
85:, restricting stated income loans, went into effect. Section 1411 of the Act states: "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.
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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.
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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.
78:, 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.
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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
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38:(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
229:"'Liar loans': Mortgage woes beyond subprime: Loans where borrowers gave little proof of income could be the next threat to the troubled real estate market - and the economy"
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is a mortgage where the lender does not verify the borrower's income by looking at their pay stubs,
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Agency Sounds
Warning On Stated-Income And Interest-Only Mortgages, Realty Times, January 10, 2005
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borrowers. The lack of verification makes these loans particularly simple targets for
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Inside the Liar Loan: How the
Mortgage Industry Nurtured Deceit
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Dodd–Frank Wall Street Reform and
Consumer Protection Act
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Mortgage
Brokers Association for Responsible Lending
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In August 2006, Steven
Krystofiak, president of the
140:Paul Muolo and Mathew Padilla (2 February 2010).
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169:'Liar Loans' Contribute to Mortgage Problems
27:Mortgage where borrowers state their income
236:"Defaults exposing truth of "liar's loans"
46:. Stated income loans were originated by
200:Section 1411 of Financial Reform Bill,
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266:Mortgage industry of the United States
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54:Reasons for stated income loans
231:, CNNMoney.com, March 19, 2007
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271:United States housing bubble
261:Banking in the United States
110:Financial crisis of 2007–08
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148:, 2008, 2010. p. 86.
171:, NPR, March 17, 2007
146:John Wiley & Sons
224:, September 30, 2006
216:Kenneth R. Harney,
180:Steven Krystofiak,
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234:E. Scott Reckard,
32:stated income loan
240:Los Angeles Times
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250:Categories
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48:Ameriquest
40:liar loans
18:Liar loans
101:mortgage
93:See also
61:subprime
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276:Loans
99:Alt-A
65:fraud
150:ISBN
42:or
36:W-2
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