Posted on 07/27/2007 7:34:04 PM PDT by RockinRight
In one of the biggest overreactions to mortgage lending problems, the State of Minnesota has passed legislation outlawing stated income mortgages. On April 20, the state legislature passed House File 1004 and Senate File 988 aimed at limiting abusive home lending practices. But did they go too far?
Oops, I Think the Baby Was in That Bucket
Requiring that borrowers must now document income and assets for all loans on primary residences and 2nd homes, the law prohibits the use of any Stated Income, No Ratio, No Doc, & No Income/No Asset loan. In other words, the only way a borrower can get a loan after August 1st is to show pay stubs, W-2’s, tax returns, and bank statements.
This would make it impossible for many self-employed people, not to mention those with income from unseasoned second jobs, notes or child support/alimony lasting less than three years, to secure a home loan. See my previous post on 4 Reasons to Keep the Wage Earner State Income Loan for a better understanding of this issue. Dumb idea? Yes, I think so.
And That Ain’t All
Minnesota’s bill also bans all negative amortization loans as well as prepayment penalties on loans of less than $75,000. It establishes an agency relationship for mortgage brokers with civil and criminal penalties to go along with it. Now, we can discuss the merits of suitability standards and penalties, but before you decide whether this legislation actually protects consumers or just covers legislators’ asses, read this:
“The agency duties above and the civil penalties specified below would not apply to mortgage originators employed by federally and state chartered banks and credit unions; since they have been exempted from these provisions in the proposed legislation.”
In other words, mortgage bankers are exempt. In grateful acknowedgement of the mortgage bankers’ lobbying efforts, huge campaign contributions, free trips, jet rides, massages, and you name it, Minnesota’s legislators once again exempted their corporate friends at BofA, Countrywide, Wells Fargo and the rest from any consequences of abusive lending practices.
Are You Kidding Me?
Sorry, no. This is a consistent theme over the years. Mortgage reform is invariably targeted at mortgage brokers. Why? Because they have more money, and we are taking away market share. Mortgage brokers have to disclose our fees and we can shop all the banks to find the best deal for our clients. The bank can’t shop and don’t have to tell you how much they’re making.
Kinda gives new meaning to the phrase, “No one can do what Countywide can.”
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A positive spin.
Maybe something like this will constitute the tipping point demonstrating that government can't be everybody's mommy.
Wouldn't self employed people and other legal citizens with odd jobs be able to use bank statements and tax returns and be fine?
GD COMMUNISTS !!
What it is doing is regulating folks that are not otherwise regulated. The folks exempted would be regulated by the Federal Reserve, the FDIC, the NCUA, the OTS, perhaps the FCA, and/or a state regulatory agency.
The writer has an agenda and perhaps a lack of knowledge of the subject.
Ever met anyone self-employed who wrote off everything from dog food to toilet paper? They may have a realistic cash flow of $5000 a month, but their AGI is $19400 a year. An underwriter uses the $19400 (plus some depreciation) as their income.
Now, there are loan programs allowing for using the average amount of deposits into a bank account for 12 months (called "bank statements" programs) but generally only subprime lenders allow this.
A mini Taft Hartley. As this gets worse look for more dumb moves like this to magnify the problems.
Lack of knowledge my ass.
Mortgage brokers have three times the regulations banks do in this regard. It just said “banks are exempt” and there is no Federal law that says the same thing.
You mean people who lie about their real income to avoid paying taxes will now face consequences for it? That's really too bad.
No it isn't. It's a mortgage broker's advertising blog.
"Did I mention that I have a fabulous and talented team of people that help me serve our clients. We call ourselves Team1. Visit our website to meet us, or give us a call or email if we can help you clarify things or arrange financing. It’s what we do.
Marc Brinitzer Big Valley Mortgage Team1"
http://lendingclarity.com/about
Well, I’m exaggerating about dog food and toilet paper, but I haven’t met many people that will forego a legitimate write-off.
Yeah, it is advertising, you’re correct. Honestly before my friend linked the article to me I’d never seen that website before.
I believe as the legal agent of the borrower the loan broker will now have a duty to get them the best loan, not the one with the highest commission for them. Granted they will still have wiggle room. Only fools trusted their loan broker anyhow. Would you trust a car salesman?
Expecting the bank to act as the agent of the borrower is ridiculous. They are required to be at arms length and are obviously interested parties.
Watch what happens to that market over the next 24 months.
Virtually everyone I know who is self employed cheats on their taxes to one extent or other. Most of them consider themselves conservative and decry criminals.
And while they are at it, if they want to stop people from taking chances why don’t they outlaw those Indian Casinos?
Oh, that’s right, they can’t.
I would suggest you do a little research before levelling such charges at the backbone of (and largest employer(s) in this nation.
You may be a victim of class envy or socialist indoctrination and not know it.
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