Column: Mortgage Matters

Are stated-income loans returning?

By: Jim Gay
Published online: Sunday, February 05, 2012
Appeared in: Home, Santa Fe Real Estate Guide
Edition: February 2012 Vol. 14 No. 11

Many of us remember how pleasant “stated income” loans were. Approximately five years ago these were considered the norm. No tax returns were required and fast approvals were expected. But in recent years, only fully documented loans have been available and the loan-approval process became arduous.

Well, welcome back to the good ol’ days. A Freddie Mac “stated-income” program has jumped back on the mortgage scene. As you might guess, any program, old or new, from Freddie Mac has its rules and regs. The new loans are for refinances only and the existing loan to be refinanced must be owned by Freddie Mac.

The HARP program, as it is called - Home Affordable Refinance Program - must be a current Freddie loan (below $417,000). In addition, there are many administrative hoops to jump through. But, for future refinances that qualify, this is good news.

Could Fannie Mae be next? The projection is that Fannie Mae will soon offer a similar program. Ask a knowledgeable mortgage-loan officer about this new program to find out if your current loan meets the standards.

Homeowners who have been current on their mortgages (primary residence only) and who have good credit scores may qualify for these new programs with much less paperwork and in some cases no appraisal. I predict that more lenders, with the concurrence of Fannie and Freddie, will in the future institute stated loans that are based on common sense. Borrowers with 30 percent or more equity and large investment portfolios will be welcome for stated income loans. Rules of excessive documentation will soften and homeowners will not be required to explain every deposit in the account.

Yes, all of this could be a change in direction for the mortgage world. For many months and even years, most borrowers have been very qualified but burdened with excessive paperwork to prove their qualification. The future is bright in the mortgage world. Interest rates will continue at favorably low levels and a gradual lessening of documentation requirements will speed the loan process.

Jim Gay was a real-estate broker for 20 years and has been a consultant to Fortune 500 companies. He is currently a broker/owner with Home Buyers Mortgage (986-9080) and can be reached at jim@jimgayhomemortgage.com.