Good News: Stated Income Loans to Return in 2010

There's good news in the lending arena. House and Senate Leaders have introduced an amendment to the newly passed 
Financial Reform Legislation to bring back stated income loans for residential lending with the following conditions:

1) The loans will only be used for foreclosed properties
2) They will first be offered to liquidate Fannie Mae and Freddie Mac inventory 

3) They will be available with 30% down payment

4) The borrower must have a minimum credit score of 740

5) The property must be an owner occupied residence 

6) The borrower must be self-employed and in their field for five years 

7) Personal bank statements for the most recent 6 months will be used to cash flow income

So it seems the data shows that when it comes to stated income loans, the baby was thrown out with the bathwater in 2008. Many of the stated income loans were terribly designed loan programs during the Sub-Prime heyday but didn't start that way. After looking at the historical data they found that when the down payments were kept high as in the early years of these stated income programs, along with higher credit scores, stated income loans were very well performing loans.

In the early 2000's these well performing stated income programs were undermined when many Sub-prime lenders entered the market. These Sub-Prime mortgage companies lowered the down payment requirements to zero and lowered the credit score requirement into the mid to high 500's. At this point, many mortgage analysts knew it was only a matter of time before the market would implode due to its own greed.

Once the implosion occurred, the bank regulators, Congress and various state entities rushed in with draconian efforts to do away with all stated income programs -- good or bad. And with a series of unwise measures, 35% of the home buyers in the nation -- self-employed borrowers, were pushed or locked out of the housing market at a time when the market needed them most.

So there you have it, another indication that the real estate market is slowly shifting back to “normal."

This week's Best Picks by Patty:

26225 ATHERTON PL, Carmel 93923 (Carmel)
$1,300,000 Beds: 4 beds Baths: 4|0 baths DOM: 7   MLS: 81029734
Large Lot, almost one acre, distant pt lobos views, located on great street private and Cul-du-sac, lots of water credits too, 2 wood burning fireplaces, Almost 2700 sq ft of living spaceplus bonus private rental unit, great investment potential in more ways than one. 3010 sf .92 acre

1 DEER STALKER PH, Monterey 93940 (Monterey)
$935,000 Beds: 5 beds Baths: 3|0 baths DOM: 4   MLS: 81030469
Beautiful home in Deer Flats Park, a solarium, full attic with pull-down stairs as bonus area plus full attic storage over 3-car garage. 2 fireplaces, large wet bar, separate family room, dining room, and breakfast room. Downstairs 5th bedroom or office/den. Hardwood floors in entry, kitchen, breakfast area. 3150sf 9710 lot

21 CUESTA VISTA DR, Monterey 93940 (Monterey)
$950,000 Beds: 3 beds Baths: 1|0 baths DOM: 6   MLS: 81029954
The view is "drop-dead" gorgeous--the whole curvature of the bay & downtown Monterey. The house could use some updating. Very private setting. 1244 sf 11,800 lot

307 DEL ROBLES AV, Monterey 93940 (Monterey)
$550,000 Beds: 3 beds Baths: 2|0 baths DOM: 5   MLS: 81030226
 Newly redone home near Del Monte Beach & NPS. Carmel stone on exterior, updated kitchen with granite counters, distressed hardwood floors throughout. Travertine stone in bathrooms. Low maintenance yard. Conveniently located to beach, rec trails and shopping. 1320 sf 4200 lot short sale

Patty Ross
236-4513

pattyross@kw.com

www.pattyrosscarmel.com
KRXA Radio Show June 25, 2010