Stated Income Loans banned in NC? (loan, interest rate, real estate, cosigner)

[DanielChang]

I saw this in another thread and posting on behalf of a friend.

Realty Times - Real Estate News and Advice

The new North Carolina law, which goes into effect January 1st, essentially ends stated-income loan applications for state-regulated loans, applications where borrowers estimate their income and lenders usually don't check.

So does this mean that if he is expecting to do a Stated Income loan to qualify for his mortgage that he needs to close before Jan 1?

[ChipL]

At first glance it appears as if it depends on the "type" of stated loan you're looking for.
There are stated loans that are basically "reduced doc" loans for borrowers with great scores, and fannie mae approvals and rates, then there are very high interest rate stated loans for borrowers with low scores or basically your typical "sub-prime deal" higher interest rate, has issues...
This looks like it is stopping the state controlled lenders from issuing stated loans without taking the time to make sure it is good for the borrower, in cases where the APR is so much higher than national average.
Federally controlled lenders are not restricted (which makes sense with a state law)

[RaleighBoundGeek]

What makes me nervous there is that it seems to exclude anyone whose income isn't deemed "documentable", or reliable, etc... a.k.a. business owners. I had to go with a low doc loan on my first house a few years ago, because I was a sole proprietor of a business, and the business was less than 5 years old. Never mind the fact that my business at the time was doing fine, and was making enough - the information wasn't deemed reliable.

I've since then grown tired of that game and left all of the dealing with government agencies/taxes/paperwork to others, but still - that could be a nasty surprise for young enterpeneurs trying to start something up.

[ChipL]

Not necessarily, if you're getting a good rate on it, ie a fannie stated approval, due to having good scores, you'll be fine.
It appears it's trying to nip the very high interest rate loans in the bud, where you've got bad scores and non documentable income. (In which case the borrower needs to take the time to raise their scores up, wait a little bit and try again)

[TimtheGuy]

Originally Posted by ChipL

Not necessarily, if you're getting a good rate on it, ie a fannie stated approval, due to having good scores, you'll be fine.
It appears it's trying to nip the very high interest rate loans in the bud, where you've got bad scores and non documentable income. (In which case the borrower needs to take the time to raise their scores up, wait a little bit and try again)

The problem is that there are stated/no doc loans in between Fannie and subprime that are OFTEN used for the SE. The bleeding heart liberals here in MN got a law passed that went into effect on Aug. 1 that banned these loans. It is definitely going to hurt SE borrowers as far as qualifying.

[sls76]

My husband opened a business this summer (so we have less than two years of tax records) which may require us to relocate to minimize his living out of a hotel room and me being a single mother and I guess our choices are to go either no income (which I was told was very undesirable) or to have a cosigner (luckily we have someone who would, but don't want to go that route). We have very good credit, zero debt except for our current mortgage which we would sell and a good (20%) down payment. Our mortgage broker (who has done two mortgages for us before) told us basically either to get a cosigner or rent. We would have had better options a year ago.

[ChipL]

That's kind of what I mean. The ALT-A loans will not necissarily have the rates high enough to trigger the new law where the definitive sub-prime rates would.