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CRAM DOWN - More relief for liars!

By
Mortgage and Lending with First Centennial Mortgage NMLS # 132763

Consider this -

As has always been the case, people try to hide income from the IRS.  Liar loans became the mortgage of choice for these homeowners.  They claimed an income that was higher than they reported on their tax returns.  Yet, somehow they were able to make the payments for years - probably from those under-reported income dollars that they hid from the IRS.  Today, there is talk about forcing lenders to modify loans where the mortgage payment exceeds a Magic Ratio of their income.  But what income are they looking at to make this determination? 

My questions is - if LIAR felt that they had sufficient income (higher than their reported income) when the obtained the loan and were successful in making payments for a period of time, then why should we use their (under-reported) tax return income for a calculation that would reduce their mortgage payment now?

Recommendation:  Borrower should be required to release tax returns from the year before and the year that their existing loan closed.  if the income they claimed was __x___% higher than they reported, then assume that their current actual income is also ____x______% higher than they report.  Use this higher income to determine any qualification for CRAM down of the existing loan.  Otherwise, the LIARS who understated their income, will have the more honest (or less creative) taxpayers subsidising their mortgage payments. 

The bottom line is any alteration of the mortgage note that reduces its value will increase the risk for future investors in mortgage backed securities.  This risk will result in higher mortgage rates in the future.

Have a great day!

Comments (6)

Kathy Toth
Ann Arbor Market Center Keller Williams - Ann Arbor, MI
Ann Arbor Real Estate Experts - Kathy Toth Team

They come out everywhere, don't they?  And I really like your term "liar loans".  That's hilarious!

Kathy

Feb 26, 2009 05:07 AM
Angelo Cusinato
First Centennial Mortgage - Barrington, IL
CRMS, CMC, Mortgage Specialist NMLS # 207204

Kathy, Thanks for the response.  As companies and families cut back to survive, it is sinfull the way our government spends money without ever trying to convict those that could have stopped this earlier.  Could it be that those that regulate would rather protect those crooks rather than take a chance that they would be pulled under the bus with them?

Feb 26, 2009 06:36 AM
Donnie Watts
Palmetto State Insurance Agency - Lexington, SC

I have alos thought of this. I know they were making more money than they were reporting because we all try and reduce our tax base.

Feb 26, 2009 06:57 AM
Rick Frissell
HomeXpress Realty - Valrico, FL
aka "The Red Baron of Real Estate"

I am surprised by the arrogance of your sharp name calling of some of your own clients.  That is, unless you NEVER did a stated income, err I mean Liar Loan yourself. 

If you ever drew a commission for a stated income then you are an accomplice and I therefore support your call for conviction.

Mar 04, 2009 12:13 PM
Angelo Cusinato
First Centennial Mortgage - Barrington, IL
CRMS, CMC, Mortgage Specialist NMLS # 207204

Rick, my arrogance might be because I did not draw commissions from Liar Loans.  Whenever a client came in I wanted to make sure that their current income supported their ability to pay.  Often those that wanted a no-income or stated income loan were asking that because they had been working with an "order taker" loan officer who did not understand tax returns or didn't want to spend the time putting together a fully documented package that a lender could approve.  Clients always payed a higher rate to take the easy way out and I didn't feel that the client was receiving value if I didn't do my best to help them.  Sure I left commissions from that market on the table and some Realtors did not send business my way but I can sleep at night knowing that my service did not help put someone on the street.  My arrogance is directed toward those who tried to make the quick buck and now are trying to make it sound like they are the victims.  I feel sorry for the unemployed, those who are trying to make ends meet and who will not receive any relief until all of their equity is lost.  I fell sorry for those who look at their kids and realize that they will be faced with paying higher taxes because of the greed and stupidity of those that pushed for more creative financing for everyone.  And, I feel sorry for those that look at this mess and wonder why ENRON and ANDERSON were dragged though the court system because of abuses while no one is being thrown in jail over this.

If you would like to discuss this further, feel free to give me a call.  Have a great day!

Mar 05, 2009 02:30 AM
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Mar 10, 2012 01:44 PM
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