As I read through daily mortgage news and commentaries, I frequently run across information about eased credit guidelines with Freddie Mac and Fannie Mae. Most recently Fannie Mae updated their guidelines for self-employed borrowers. They have relaxed documentation requirements and analysis of business and personal income.
Speaking of self-employed borrowers. It is often very hard for a small business owner to qualify for a mortgage loan because business tax returns often show very little income on the adjusted gross income bottom line. There might be some help for business owners. Help … but somewhat controversial. What I mean by is that some lenders across the nation are offering stated income loans again. These were often called NINA loans or liar loans. They were called liar loans because borrowers were stating income they thought would allow them to qualify. A borrower states to the lender what their monthly income is with very little or no documentation required.
These loans are referred to as non – qualified loans and are not sold to the secondary market, i.e. Freddie Mac or Fannie Mae. These type of loans may also require a certain downpayment or cash reserves.
This is feared by some as a reason or a least one of the reasons that caused the mortgage melt down.
What do you think? Are we heading back to what hit the mortgage business in the past by offering stated income loans?