Endangered Species: The Disappearance Of Nina, Sisa Loans
Bank of America, one of the nation&25263; largest lenders, has officially cold-shouldered all Minnesota loans monster legends hack cheats originated without verifying income ?including those still in love here the bank&25263; pipeline ?and are concerning Illinois brokers who may soon have to deal with the same fate.
The announcement, made July 23, is in compliance with two Minnesota bills ?SF 988 and companion bill HF 1004 effective Aug. 1 ?that require non-exempt brokers and lenders to verify and document a borrower&25263; reasonable ability to pay.
&25567;he broker must consider all components of the monthly mortgage payment in making this assessment, including: principal, interest, real estate taxes, homeowner&25263; insurance, assessments and mortgage insurance premiums,?said Bank of America, regarding its new lending guidelines. &25538; statement by the borrower of the borrower&25263; income and resources is not sufficient to establish the existence of the income or resources.?
Due to the new bills, Bank of America will no longer accept registrations for the following loan products:
state income program;
state income/state asset program;
state income combo home equity loan program;
stated income/stated asset combo home equity loan program;
combo home equity line of credit;
no income/no asset program;
ManyOptions ARM product; and the
no-ratio loan program.
&25553;t&25263; prudent for brokers to ensure borrowers have the ability to repay to get into a home and then keep that home,?Wade Abed, president of the Minnesota Mortgage Association, told Broker Newswire. &25573;e&25251;l see the law affect borrowers such as entrepreneurs who don&25264; have a traditional source of income. It will be much more challenging for a broker to verify the borrower&25263; ability to repay but do I think it will stop them from being doing those loans? It will make the challenge greater but not impossible.?
According to the bill, originators can verify income through tax returns, payroll receipts, bank records or other similarly reliable documents. If the borrower&25263; ability to repay is based on criteria other than the borrower&25263; income and financial resources, it is expected that a &25608;ortgage originator would have appropriate written file documentation, on a case-by-case basis, to support the underwriting decision.?
&25573;ithin the spirit of the law, the language in the legislation talks about what types of documentation are reasonable and verifiable,?Abed said. &25573;hat one would have to do is investigate a little deeper into the assets and income (of borrowers with non-traditional income) and rely on those documents ?whether traditional or alternative ?to gain the verification.?
The bill may set originators up for fiduciary responsibilities that can cause a borrower to file suit covet fashion hack 2017 if the loan goes into default.
&25567;here is certainly a component in the legislation for a borrower to sue a broker,?Abed said. That&25263; why &25553; think it certainly would be a prudent practice to insure that you (as a broker) have done everything possible to document reasonable income and to come up with a standard that you are tolerant to in terms of risk associated with it. You can rely on the tolerance levels of the government-sponsored enterprises ?Fannie Mae and Freddie Mac. As a broker, you would have to decide and confer with your counsel if that tolerance level is enough.?
Tension in Illinois
The Minnesota legislation sounds similar to Illinois SB1167, which passed July 19 in the state House with a 70-43 vote and now goes to the Senate.
The bill, sponsored by Sens. Jacqueline Y. Collins, Dan Rutherford and James T. Meeks, would also require brokers to verify a borrower&25263; income and financial resources before securing a loan.
&25538; statement by the borrower to the licensee of the borrower&25263; income and resources is not sufficient to establish the reasonable ability to pay,?the bill said.
&25557;anguage in SB1167 is almost identical to what we are already seeing in Minnesota, California and Ohio,?Bill McNamee, president of the Illinois Association of Mortgage Brokers told Broker Newswire. &25573;e see lenders already in Minnesota closing or pulling out of the sales of (no-income, stated-income loans) as well as pulling wholesale of those loans. The banks, who charge higher rates, are going to reap the benefits of this. It&25263; going to crush the brokers out there.?
Illinois mortgage planner Kit Mueller is urging fellow brokers to take action.
&25567;he bill just went to committee, so get on the phones and call slither io hack cheats your legislators today, to stop this from limiting borrowers’ choice in Illinois,?he posted on his blog, mortgageplanner.blogspot.com.
A familiar product may save the day as more states do away with no-income and stated-income loans ?the Federal Housing Administration (FHA).
The House of Representatives is currently reviewing H.R. 1852, the Expanding American Homeownership Act of 2007, which would allow brokers to originate FHA loans without obtaining $75,000 in assets or an annual audit. Instead, the bill would require brokers secure a $75,000 surety bond.
If passed, all brokers with a bond would be able to originate FHA loans in high-cost areas like California, and offer incentives like a low downpayment and low closing costs.
The bill also permanently eliminates the current statutory volume cap on FHA reverse mortgage loans to permit this program to meet the growing needs of home-equity-rich and cash-poor senior citizens.
However, McNamee doesn&25264; believe the ability for brokers to originate FHA loans will counter-balance the damage done by Illinois SB 1167.
FHA &25603;s something that should happen without regard to any (other) legislation,?he said. &25553;t should be done anyway with the intention of putting people into homes.?
Adjusting to legislation
Regardless of what legislation is passing, Abed is encouraging brokers to adapt, saying it&25263; the only way to survive.
&25541;hange is inevitable,?he said. &25544;volution is always happening and it&25263; up to us to overcome it.?