No, I'm not really a girl. I think I had a Madonna song stuck in my head. But the heart of my title is this: Lenders are slowly squeezing loans back into the full doc box. If you haven't heard, no doc loans are gone (other than hard money). In fact, any loan with the word NO in it is virtually becoming extinct. Even Stated Income loans are being scrutinized to death.
Case in point. Had a borrower with 780 credit, plenty of assets, and a perfect mortgage history. I chose a Stated Income/Asset product to make life easier on my client as she has 3 jobs and is attending school. She works at a gym and I went to Salary.com and printed out the bell curve showing average pay for her position. I stated an extremely reasonable income on the loan application and sent the package in to a very large, well-known lender. Days later, they declined my loan. They felt my income was too high. I spoke with the underwriter to get an explanation and she told me that they had the prerogative to change my loan to full doc at any time and they were requesting paystubs and tax returns to substantiate an income that they felt was too high. My borrower was going out of the country for 2 months and this wasn't possible, so we tabled the refinance until March.
From what I understand, limited documentation loans developed out of a need for speed. Lenders could do more loans in less time if they didn't have to sift through hundreds of pages of income and asset docs. Borrowers with great credit and a strong balance sheet were rewarded and so were the investors buying these high-quality loans.
Like anything in life, the pendulum swung to the far left, and stated income loans became easier to get than a fishing license. Now the pendulum is swinging back to the far right and we are headed for the "old days" when you had to prove your income, assets, and job history. And, you have to have equity in a property or the ability to put money down on a purchase. Underwriting turn times will slow down and we need to be ready for that.
Is it right? Doesn't matter. The end investor is running far away from these loans. Fannie Mae can't sell them. So they are going, going, gone. It will affect everyone's business in the real estate market. Beware of any loan that isn't full doc and know the risks. Anyone who says they can get these loans done all day is living in a gingerbread house. So yes, I'm turning into a full doc girl, I mean, guy. I will colect tax returns, paystubs, W2 forms, business licenses, 401K statements, and everything else. That is, until the pendulum swings back.
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