Stated Income = Stated Fraud?

[Secret!]

Stated Income = Stated Fraud?

On the 1003 on the bottom of page 4 it says: "I/We fully understand that it is a Federal crime punishable by fine or imprisonment, or both, to knowingly make false statements concerning any of the above facts as applicable under the provisions of Title 18, United State Code, Section 1001, et seq." That's serious!

Besides the ethical, moral and DTI/foreclosure issues here, understand more and more regulatory agencies are focusing on these Stated loans and holding Brokers and Loan Officers responsible. If you know the income is wrong, you are aiding and abetting criminal fraud and the risk is not worth the Big Fat Commission, just because you flipped it to Stated.

The purpose of 'Stated' is for documentation relief, not to inflate income. If you suggest, alter, or change the income, you are committing fraud.


PS: And, yes of course I know the wholesale AE is a major part of this problem -- it's simple GREED all the way around

[Greg]

Let me give you a scenario and see what you think.

Wage earner making 3000.

Son lives with this borrower and pays cash monthly in the amount of 300 (No Documentation to support)

So you do stated in the amount of 3300.

Seem ethical or no?

[Secret!]

'STATED' is to make document collection easier - not a way to make more commission off unqualified loan. In your example, do you have a wholesaler who would accept fully documented income from a relative border? If you do, then show bank statements and go full doc.

EVERY SINGLE PERSON EMPLOYED IN THIS INDUSTRY - who reads regularly industry publications KNOWS 'STATED' is abused excessively by LO's. There's countless stories and stats to back that up; everybody "I" speak with knows it too.

On only the rare occasion do you (or anyone) come upon an applicant who truely needs to be taken, STATED, instead LO's, Brokers and AE's use 'STATED' so they can make a big commission

[Erik]

So what's an example of a scenario where stated is not fraudulent? I'm confused... if I'm understanding you correctly, Secret, stated programs shouldn't exist at all.

[macp]

I think Secret means only if you have a hard time documeting income it should be done. But the truth is in places like California you have to go stated. Values are too high and will never level out to the average persons income. Most people will say $20 dollars a hour is good pay then add a second income of $15 dollars an hour for that household. With bills and car payments this average family wont qualify for the median price of $580k. But no matter what some dti calculations says people are going to need a home and will make it work. This is how things are done and will have to be done for the average person to get an average home. Im originally from San Diego and houses in the ghetto go for half a million. Thats why everyone goes stated, I never went full doc on anyone from California. I do multiple states now and have noticed my clients actually dont have to go stated. Its kind of weird.

[Greg]

Secret! I knew that. Thanks for posting it though. It might help others who do not or are not educated enough on the industry to think like this.

I am seeking your opinion on the scenario though if you want to comment.

Let's assume that there is not other lenders and border income is not acceptable nor is bank statements.

Do you feel this would warrant 3300 on a stated income loan? Ethical or Unethical in your opinion.

I also said no documentation to support which would include bank statements but I was vague.

You deffinately have the right thinking though Secret! I appreciate the additional input!

[Secret!]

I was a portfolio lender and mortgage banker seller/servicer for 98% of my career Greg. So I think differently then those that earn all their income up front, where subsequent problems is the other guy's job/problem. Therefore, I think in terms of 'is this a good & collectable loan' vs how much commission can I earn on this loan. That's a major difference in the overall quality of what gets put on the books ... and ... what gets put on the books is what will haunt originators as the MBS's explode (as many of them have been doing the past few years, especially those laden with STATED & NoDOC products).

YA see Greg STATED & NoDOC loans make a big income for the originator NOT for the funding sources however. So all the front-end big commisison loaded personnel (LO's & AE's) all love them. In the long run, they're bad for the industry, except in only a few very exceptional unusual borrower situations. So far the numbers have merely out-ran the problems ... that comes to an ugly stop.

As that last posted freely said, he's always done fraudulent loans (pumping up income so people can qualify), so he could suck out a Big Commission. Unfortunately, we all know he's not alone ... that warped thinking is commonplace --- I'm simply trying to SCREAM-Out about more ethical values. There's plenty of blame to go around, the industry will suffer for this.

[Erik]

Originally Posted by Secret!

YA see Greg STATED & NoDOC loans make a big income for the originator NOT for the funding sources however.

So why would funders have these products in their portfolio, and over such a long period of time, if they know these particular products are guaranteed losers? Loss-leaders?

I have a hard time putting all the blame on originators if these products are misused when people who make the rules and set the guidelines for these loan programs do so with full knowledge of a) how the programs are being used and b) the likely losses they will incur by accepting loan files of the stated/no doc type.

I'm sure it's not just the AE's that know how stated programs are used. If the losses are known, then the lenders know *why* they are losing on those programs. Yet they continue to offer stated/no doc programs.

What do you think, Secret?

[Secret!]

Erik, not saying Loan Officers are the problem, they're surely MOST of the problem with doing fraudulent loans, but wholesale AE's are just as guilty - absolutely.

There's a common misconception that a lender can out-run their problems if they keep production volume number ever increasing. Of course that's not possible, but while they'e under the influence (of HUGE numbers of originations) - they tend to feel like they can do no wrong, a superman kinda thing.

When these products were first introduced, their edition to a product line @ LOW LTV's and HIGH Credit Scores for those very very very few people that needed them, it made sense (even to me) and was a good idea.

Then came the epidemic of greed that's so pervasive in this industry the last 6 or seven years or so --- THAT'S the problem

[Erik]

Well, I just have a hard time believing that executives at big companies don't have any idea that either fraud is being committed or that they are losing on these programs. They may not have known when they first started losing, but as soon as they did it was investigation time and surely they figured it out. That's all I'm saying - they know.

And logically, the perpetuation of these products doesn't make sense if lenders are losing money on them.