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Platinum Super Contributor
buyinghouse
Posts: 5,890
Registered: ‎04-23-2011
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Stated Income? Desperate measures in this market call for it? Bubble anyone?

[ Edited ]

   I didn't hear anybody knocking on my front door at all buy my daughter did. She told me, I went to open it and there it was, a flyer from a reputable Realtor and his courtship of loans and whatnot's embedded in the flyer. I thought it was the tiresome one a RE agent/beginner prints and spread around so he can get clients, whatever.

  

   But, what called my attention is the part I want you guys to read. He is saying he will refer you to a lender specialized in "Stated Income". I couldn't less than laugh, we are coming slowly to the wild west, you can use whatever to shoot your enemy buying a house, that means, lying and cheating with the complicity of those who nowadays cry saying the government did a bad thing bailing them out.

 

 

Gold Regular Contributor
sheriff
Posts: 2,419
Registered: ‎06-01-2012
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Re: Stated Income? Desperate measures in this market calls for it? Bubble anyone?

what does stated income mean.  You state your income and they accept it as fact?

Gold Contributor
mediaguru
Posts: 1,909
Registered: ‎03-03-2011

Re: Stated Income? Desperate measures in this market calls for it? Bubble anyone?


sheriff wrote:

what does stated income mean.  You state your income and they accept it as fact?


Basically, yes. Also called "liar loans"

 

It is a big part of how the first housing bubble came to be.  People would work at Walmart but claim they made the $50k+/yr they needed to make the mortgage payments... then they would get ARMs or something else so that they COULD make the low payments (at the beginning) but then once those payments adjusted, they were screwed.

 

They assumed they could do this because many people (like the bulls on this forum) would tell them "Real estate always goes up! You can't lose! So it doesn't matter if you can actually afford the payments, because your house will be worth more in the future... you can always just sell it for a profit."

 

Yes, the bubble is upon us again. But it won't be as big and I think most people will find it won't become full-fledged like the other one.  We are seeing a perfect example of dead-cat bounce: prices drop ridiculously low (overcorrection), so people start snatching things up because they are such a "bargain", causing another overcorrection in the opposite direction.  This will last about a year, and has already begun...

 

2014 is when things will settle down.

Super Contributor
Metalhead
Posts: 224
Registered: ‎12-20-2011
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Re: Stated Income? Desperate measures in this market calls for it? Bubble anyone?

The stated income loans got lots of people in trouble.  I just did a refi with a 30-year fixed/no points and loads of equity and it still took a ton of detail, including verification of employment and multiple credit checks.  It feels like reputable financial sources are tightening things up anyway.  It feels like there is less of a wild west approach to loans nowadays but I might be wrong about that.

Platinum Super Contributor
buyinghouse
Posts: 5,890
Registered: ‎04-23-2011
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Re: Stated Income? Desperate measures in this market call for it? Bubble anyone?

   Yes, stated income got so many in trouble and some loan officer who took off before the melt down a little bit rich. I interviewed many people back in Visalia who said they were escaping the killing in the BA. When asked, the locals, the ones who could prove they worked in Visalia and surrounding areas, they told me their income was equal or less than $1,200. Even though homes were still available for $85K-$125K, my knowledge at that time and all the training I had (forgotten now) told me I need to reject their requests. Only to see them going to the next guy at the office who with smiling teeth would give them the liar loan.

 

  Then, I interviewed guys coming from the BA with a lot of money in their pockets after selling their condos for $500K-$600 and pocketed $300-$400K. To my disappointment, they didn't want to hear me out. They said they wanted to buy properties here (Visalia) because as they did in San Jose, they would do here. No matter what, even though they qualified to buy anything, I honestly told them that I wasn't going to be a guy who gave them the gun to commit suicide. Again, I saw them going to the other guys at the office who gave them the loans, and I would end up being a dummy because I didn't want to pocket the money in both honest and liar loans.

 

  Part of the problem in building a bubble is that people can't, don't and won't hear the bells of caution. As it's hard to predict the tip of the bubble ready to pop up, people think they are still ahead and can sell later. Even, I saw the same guys who would laugh at me, buying properties that over there would be 3 times what they were a year before. This is the only instance where I laugh and get content that these guys got what they deserved, they bought big mansions, only to get stuck in a mortgage of their own. By now, I am sure most of them lost those properties as we know the lending industry took a big deep when the bubble burst. Being in that field, you get to know so many things, good and disgusting ones, specially that you get educated and you become the first one to learn about strategic default. do it and be the advocate for the rest to follow suit.

Silver Trusted Contributor
Michelle1x
Posts: 1,063
Registered: ‎02-17-2008

Re: Stated Income? Desperate measures in this market call for it? Bubble anyone?

[ Edited ]

I'm one of 3 people in the country that actually supports the existance of stated income loans.

 

The problem I have is that the tax laws for small business and sold proprietors is inconsistent with mortgage rules/laws.

 

If you have schedule C income of $250K, the govt practically begs you to spend every cent of that $250K on infrastructure to "build your business".  The bush tax cuts were all about this- encouraging purchases of huge gas guzzling $100K+ vehicles with 100% deductible writeoffs directly against income.  One of the tax laws (section 179) deductions were increased to over $100K on practically anything- you could buy lighting, computer equipment, a tractor, or practically an entire house and claim it as a business expense.

 

If you take advantages of these favored tax laws, you wind up with "income" of $12K but schedule C receipts of $300K.  And one of the sec 179 deductible expeses is a home office!

 

It is for these people that stated income loans were created.  The problem is there is no way to regulate them.

Silver Trusted Contributor
Michelle1x
Posts: 1,063
Registered: ‎02-17-2008
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Re: Stated Income? Desperate measures in this market calls for it? Bubble anyone?


Metalhead wrote:

The stated income loans got lots of people in trouble.  I just did a refi with a 30-year fixed/no points and loads of equity and it still took a ton of detail, including verification of employment and multiple credit checks.  It feels like reputable financial sources are tightening things up anyway.  It feels like there is less of a wild west approach to loans nowadays but I might be wrong about that.


Yeah
 I recently found out that one problem I had in the past is the ONE of the 3 credit bureaus is reporting me as late a few times on one of my mortgages.  I wasn't late- I did a principal recast on that loan and there was some sort of screwup and I got 3 late charges that I had to back out.  It was a big hassle and the bank updated my credit as clean last year- I THOUGHT.  Now, transunion shows me as green but experian shows me as 4x lates from 2012- but current *today*.

 

My credit score is still really high, so I never noticed this.  But then, I applied for refi with Wells and this one credit report showing the lates disqualified me!  Now I have to dispute it.

 

Tons of equity in the house I am trying to refi- I have never been late on that mortgage which is already a wells.  Sheesh man.  Anybody that says banks aren't doing DD today is crazy.

Super Contributor
donjumpsuit
Posts: 245
Registered: ‎08-07-2012
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Re: Stated Income? Desperate measures in this market calls for it? Bubble anyone?

My problem with this process is that I have paid ~$2000 in rent, just about every month for the entire time since I arrived i California.  

 

Yet on the otherside, there is no way I would be able to get a mortgage with a ~$2000 monthly payment with my paperwork.

 

There is no 'Rent payment" on a credit report or history of that, which would help in any way on a mortgage application.

 

Sure there is 'Rent check" and other services, but this more or less only tags offenders, not positives.

 

In my world, I would default on just about every other obligation before I would default on my payment for shelter.

 

But because people have shown a pattern of defaulting on mortgages, and banks have shown a pattern of behavior where they don't' immediately address it, it seems they have to be very protective.

 

Another round and round we go, where we end up nobody knows.

Visitor
moonchild
Posts: 1
Registered: ‎01-10-2013
0

Re: Stated Income? Desperate measures in this market calls for it? Bubble anyone?

@donjumpsuit

 

I am going through a refi (traditional fixed 30-year) of my home which I had previously financed with a private mortgage from the former owner - paid faithfully every month, have plenty of equity in the home and no other debt. I only have 1 credit card and  the bank is raking me over the coals because I don't have enough 'trade lines' on my credit report. To fix this and with my authorization they added some of my utility bills (such as Comcast) as trade lines to my credit report to satisfy the underwriters, you may want to look into this possibility.

To anyone else who thinks banks are not doing their due diligence, my current personal experience shows otherwise...! lol

Gold Super Contributor
TerriM
Posts: 3,368
Registered: ‎05-02-2011
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Re: Stated Income? Desperate measures in this market call for it? Bubble anyone?


Michelle1x wrote:

I'm one of 3 people in the country that actually supports the existance of stated income loans.

 

The problem I have is that the tax laws for small business and sold proprietors is inconsistent with mortgage rules/laws.

 

If you have schedule C income of $250K, the govt practically begs you to spend every cent of that $250K on infrastructure to "build your business".  The bush tax cuts were all about this- encouraging purchases of huge gas guzzling $100K+ vehicles with 100% deductible writeoffs directly against income.  One of the tax laws (section 179) deductions were increased to over $100K on practically anything- you could buy lighting, computer equipment, a tractor, or practically an entire house and claim it as a business expense.

 

If you take advantages of these favored tax laws, you wind up with "income" of $12K but schedule C receipts of $300K.  And one of the sec 179 deductible expeses is a home office!

 

It is for these people that stated income loans were created.  The problem is there is no way to regulate them.


I'm sorry, I'm a little confused.  As someone who has done Schedule C's as well, I understand that you can write things off against your business income, but they are supposed to be business related, not home related.   Even home-office space is supposed to be office space, not used for home.  So what exactly are you writing off if you're "earning"  $12K, but spending more to live?  Or are you saying that you are living in one tiny bedroom and tiny kitchen and running your office out of the other 80% of your house?