Here is another program that is often abused or manipulated. I think the general concept of this loan was this:
A self employed borrower owns his own business. He only takes a moderate paycheck so he can continue to grow his business. After a while, his company really starts to make a profit. He decides he wants to buy a nicer home, But the lender wants to see what he has made in the last 2 years. The owner then says "I have made a lot of money, But I have reinvested it into my company." This I believe is where stated came from. It gives the Underwriter the flexibility to say "Yes , it is likely that this could happen and that he could have made that much money doing that job.
Another great reason to use stated is if someone makes overtime, it hasn't been consistant for a full year and it is expected to continue.
Now, We find that instead of telling John Doe "You really don't make enough money to buy this home," instead, Lets say you make enough so you can get the home. It doesn't matter that you don't really make that much. And we can just keep inflating your income until the ratios work.
The customer is happy because he gets the approval.
A bad time to use stated would be a single parent making $10.00 working as an assistant that has their credit cards maxed out. The borrower can't ratio because she is maxed out,But if you keep stating her income until the ratios work. Then some people would thing they have a loan because the ratios will work now. Just because you can make the ratios work doesn't make it right.
I am sorry, But I don't work this way. It would be hard for me to sleep at night knowing that I just helped someone get a loan that they didn't deserve and eventually won't be able to pay for it. Ratios are used for a reason. If the customer doesn't qualify. Then they Don't Qualify. Just because the numbers can be manipulated doesn't mean that they should. Unfortunately there are some people that only care about closing a deal. No matter what the cost. I think that is sad.
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