Is the "No Doc" and "Stated Income" loan DEAD!!!

Like many I can honestly say that the no doc loans and stated income loans were abused. Consumers, Brokers, Banks, Investors and anyone in the R.E. field took advantage of the market. There is no single person to blame but rather a compilation of faults, greed and people being naive. The lending business was taken so out of whack with no guidelines what so ever. Where common sense no longer was relevant were people alike were living in a fantasy world of more more more. Everyone was in the business of making money and the fact of the matter is Mortgage Brokers got the runt of it where in fact most of those who really made money were in fact not even licensed individuals. Any Joe Schmo off the street decided they were going to open a mortgage company. I ask the question as a licensed Real Estate Broker and Licensed Mortgage Originator where was the law then, where were the guidelines where were the laws and boards governing this Industry.

Now at a desperate attempt to bring stabilization to the market we have taken a 360 degree turn. Banks no longer want to lend , guidelines have changed, laws have formed that once again no longer make sense. People are developing this business who are not a part of it. How can one make laws about something when they do not do the steps. How can a dancer teach one to dance if they have no rhythm or have never danced. Although I am happy that the current market has pushed a lot of bad seeds out of the business the fact of the matter is that those of us that are left are professionals this is our career not a fad, not a trade, not a quick money making fix. We are here standing fighting to make the American dream of home ownership still a reality.

We wrote to the senator regarding no doc and stated income loans and were welcomed with the following response.


"Dear Mr. Vaziri: Thank you for contacting me to express your concerns about legislation to reform mortgage underwriting standards. I appreciate the time you took to write and welcome the opportunity to respond.

On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203) into law after many months of deliberation and debate. During the Senate's debate of this legislation, Senators Jeff Merkley (D-OR) and Amy Klobuchar (D-MN) offered an amendment that prohibits mortgage originators from receiving payments based on the terms of a loan. Additionally, it requires lenders to verify a borrower's ability to repay with income and asset documentation. I supported this amendment, which passed the Senate by a vote of 63-36.

I understand that you feel this amendment could limit mortgage options for home buyers and reduce profits for honest mortgage brokers. However, I strongly believe that more must be done to help protect consumers from predatory lending practices that contributed to the subprime mortgage crisis. This legislation accomplishes this objective and works to prevent originators from steering home buyers into more costly loans. More importantly, it prohibits the practice of issuing "no doc" loans, in which home buyers are not required to provide evidence showing that they can actually repay their mortgage.

Once again, thank you for writing. While we may not agree on this particular issue, please know that I will keep your concerns about mortgage underwriting standards in mind should the Senate consider relevant legislation in the future. If you have any additional questions or concerns, please do not hesitate to contact my Washington, D.C. office at (202) 224-3841. Best regards.

Sincerely yours,

Dianne Feinstein
United States Senator"

Although I agree this loan type may have been abused and stricter guidelines must be enforced there are some people who need this type of loan and they deserve to have it. You can't compare a person applying for a no doc loan who is putting more than 20% down, has a 720 fico score, reserves and who is over all an A paper client to someone who in the past said they were a factory worker making 100k plus with a 600 fico score and 100% financing. Like I say we have to find a medium we can't keep bouncing from one extreme to another.

So to answer the question for many yes the "NO DOC" and "STATED INCOME" loan is dead for now.

Please we welcome your responses and opinions.

Leila