Hi Breeze, you may only know of one, but there are dozens of legitimate reasons.
If someone comes to me and tells me that they are a wage earner and want to go stated, it raises a red flag.
By asking a few questions, I decide if I want to work with them or not.
I never know if they are telling me the truth or not, but it is not my reponsibility to play detective to catch people lying. I have a conscience and morals. That’s not my function, any more than an employee at Best Buy should quiz the buyer of a $5,000 TV on extended credit about their income, or a car dealer telling someone that they cannot afford a car, if they get approved for financing. It’s up to the lender in every case. They are instructed what levels of risk to take.
I just need to put the application together for submission to the underwriter for lender decision. I am not the one that came up with the idea of Stated Wage Earner loans, the lender did. They are willing to take risks based on their criteria. That is what they do.
The obvious (which is what we all assume) is that if you get a paycheck and W-2, and don’t want to show it to the lender, you are lying about your income. It isn’t that simple.
I ALWAYS explain this to a wage earner who wants to go stated, so their better be other factors. I will not do a loan for someone with $3,000 income and $2,000 payments, and state $6,000, because I know that they can’t afford it, and I will tell them that. They can go elsewhere if they want to, and some probably have. I can’t stop them.
Most people just don’t understand underwriting guidelines.
A wage earner who is salary plus commission gets their tax deductions viewed differently. Their paycheck shows this.
Some get tips as a large portion of their income but cannot prove them.
Some rent out rooms in their house but cannot document the income.
Someone who takes a home office deduction and car expenses on their tax return has AGI that may not qualify.
MANY have other sources of income that cannot be documented for different reasons.
Some have WEALTHY families that support them.
Some have a spouse with a huge income but low credit score, so the loan is done with higher score person only.
Some people have switched jobs and have huge swings in income that lender won’t accept full doc.
Some have rental property and need to refi primary to payoff other mortgage.
Some need cash out to payoff other debt and lower overall payment.
Some people have cosigned for another loan that someone else pays for 100%, but the debt counts against them.
Sometimes it’s just EASIER and the rate could be exactly the same as full doc.
Legit overtime income may not be accepted by the UW.
Many lenders will not factor in a debt payment that is 10 months or less, but you may have 12 months left.
There are many other good reasons.
I didn’t get people into their mess, I try to get them OUT.
Many people don’t know that you only get credit for 75% of gross rental income, and with several properties, the difference in actual income and what lender credits you can make the difference in full doc qualifying (or not) to a wage earner.
MANY MANY people who went stated income were able to get loans and can easily afford their payments. It allowed many people to buy a house, who now have equity. Personally, I wouldn’t have lent them my money.
The actual % of defaults is tiny compared to what was funded, but it’s the defaults that are getting 100% of the publicity.
Of course there are idiot mortgage people who created/fabricated incomes (and even jobs) so they could get a loan done, and there are devious borrowers who knew the system and how to abuse it, and there were some people who just simply couldn’t afford it.
Even with all the publicity, there are still plenty of rogues in the industry, trying to trick and cheat people one way or another.
Long answer to your simple question. Probably not the answer that you would get from most mortgage people, IF they told you the truth.
