Posted by Mark(NC) on July 09, 2007 at 14:48:05:
The only question left is to determine the percentages of liability assigned to each. neither party would want me on the jury if it got to that point.
what are my rights aginst recalling a loan - Posted by Ron
Posted by Ron on July 07, 2007 at 13:59:54:
The lender says that the stated income was too much on my refi. loan last year.
Can they force me to refinance or sell this investment property??
Ron
Re: what are my rights aginst recalling a loan - Posted by Rich-CA
Posted by Rich-CA on July 08, 2007 at 19:58:41:
I did a “stated” loan recently, not to inflate the income but because my wife’s share of the income was necessary to qualify but the property and loan were in my name. It does not need to be a “liar loan” unless the person filling out the app is a liar.
All loan docs call the intentional misrepresentation a breach of contract and cause for calling the loan due. It is also a Federal offense to intentionally misrepresent the facts on a loan app.
Very surprised - Posted by Mark (SDCA)
Posted by Mark (SDCA) on July 08, 2007 at 18:26:23:
Very surprised at all the “lender hate” here. I seriously doubt that it says anywhere on stated loan applications: “We aren’t going to verify your income so feel free to lie”.
No one is FORCING these borrowers to take out loans, lie on their applications etc.
Re: what are my rights against recalling a loan - Posted by BTI
Posted by BTI on July 08, 2007 at 09:02:27:
Ron
I don’t want to be the doomsday machine here, but not to long ago here I pointed out what a lender could do to make an example of someone in order to send a message to the multitude of others.
I mentioned a case in California where a guy on his loan app put his main income correctly, but he put his past total part-time hours worked incorrectly so his annual income at the time of the loan was wrong. And even though the income became right not to long after the loan was issued, and he never missed a payment for five years they seized his home and prosecuted for loan fraud.
Part of my real estate brokerage was a mortgage brokerage, and the powers to be made sure all the mortgage brokers in the state received a copy of the action taken.
So find out what the lender wants, maybe they just want to recast the loan and are holding a very big club over you head to force you into new terms. Maybe they want it paid down to a level that they would feel safe with. Maybe both.
But as Max said keep your mouth shut as to the facts so a misstatement can’t be used against you later, just get them to put their cards on the table so you know what they want and then come up with a solution.
BTI
Can’t force you to refi, but… foreclosure - Posted by JT-IN
Posted by JT-IN on July 07, 2007 at 20:13:51:
Is their remedy if you don’t. They can also hold the threat of “loan fraud” over your head if you don’t voluntarily refi the loan. They cannot force you to refi other than that.
You must have signed an IRS Form 4506 with the loan packet… They must have requested a copy of your tax return… and they have caught you in a mis-statement… that is why they call these stated income loans, “Lier Loans”, because a high percentage of the applicants misstate their income. Doing so is fraud…
They could make it rough on you, so you will have to decide what to do here… As previously stated, your ability, (as well as almost everyone’s ability) to go out and obtain a loan with terms and underwriting that you obtained with that loan, are history. So you may both be stuck… You with the loan, the lender with you… unless they decide to accelerate the loan. This is fully within their right to do so… I tend to disagree with the statements that they aren’t going to call a performing loan. I guess you will find out soon enough.
Let us know how it turns out…
JT-IN
Re: what are my rights aginst recalling a loan - Posted by Dave T
Posted by Dave T on July 07, 2007 at 19:41:01:
Just curious. Did the lender say why they believe your stated income was too high?
Did you fill out a W-9 that gave them permission to pull your tax returns?
Re: what are my rights aginst recalling a loan - Posted by Ben T
Posted by Ben T on July 07, 2007 at 15:06:27:
Ron:
My guess is that if you misrepresented yourself in your loan application that the loan agreement would provide the means for the lender to call the loan.
I say this with tongue in cheek, because we all knew that stated income loans gave the borrower the possibility of “inflating” his income, including the lender.
I doubt though in today’s climate that any subprime lender is going to call a loan that is current. You don’t say whether you’ve missed payment(s). If you’ve missed payment they could call the loan for your having misrepresented your income, or simply because you have missed payments and it is a first step toward foreclosure.
Ben T
Re: Very surprised - Posted by Ben T
Posted by Ben T on July 08, 2007 at 18:53:20:
The whole point of a stated income loan is that the income is unverified. If the income was going to be verified then what was the point of creating a different category called “stated”? And if the income was going to be checked against tax returns, then why not check before the loan was actually made?
I think it is safe to say that the lenders who made these loans made them with full knowledge that a income misstatement was not only possible, it was probable. The loan was made based on other criteria, such as credit score, equity, etc…and interest rates were set according to perceived risk.
Ben
post the particulars of this case? - Posted by lukeNC
Posted by lukeNC on July 08, 2007 at 14:02:12:
Sounds strange, yet interesting, care to post the link to this case or some particulars such as names?
Re: Can’t force you to refi, but… foreclosure - Posted by Ben T
Posted by Ben T on July 07, 2007 at 22:32:17:
I would be interested in why you believe they would call a performing loan? Surely they knew that income was inflated on stated income loans, at least unless they were blind, deaf, dumb. And they have their hands full of non-performing loans at this time. Why call a good one? And if this is the practice, won’t they have to call most of these types of loans?
Bem
Re: what are my rights aginst recalling a loan - Posted by Ron
Posted by Ron on July 07, 2007 at 15:35:22:
Thank you Ben,
answer to your question, this loan is current and paid up acording to the loan agreement. There is no reason to call this loan except the stated income.
I am just wondering, every one inflated their income on stated loans. If the lenders have a legal avenue to come after these loans, can you imagine what is going to happen to the state of real estate and the economy??
Re: Very surprised - Posted by Mark (SDCA)
Posted by Mark (SDCA) on July 08, 2007 at 19:01:31:
“The whole point of a stated income loan is that the income is unverified.”
I don’t believe this to be the case. Where on the app does it say that the stated income will never be verified? Im guessing nowhere. My understanding of “stated” was that it was for people who had “issues” documenting their income ie commissions or self-employed but NOT strict W-2ers. Again, it is NOT free reign to LIE AFAIK.
“And if the income was going to be checked against tax returns, then why not check before the loan was actually made?”
Maybe because the income taxes for the year in question has not been filed yet?? But the reality is… it doesnt matter. We presumably are not talking about an error. If we are then just go to the lender and say so. “Misstatement” is just a government term for LYING. But please… show me the “stated loan app” where it says, “Lying on this application is NOT a problem.”
Re: post the particulars of this case? - Posted by BTI
Posted by BTI on July 09, 2007 at 07:49:56:
Luke
I would love to post a copy of the entire notice but it is buried in storage two states away. The reason I even really remember this case is that for a while I had my loan officers put a copy of it in the package we gave to our new prospective borrowers.
Contrary to public opinion we didn’t want people getting into trouble by borrowing more then they could afford, or should, in order to increase our fees. Repeat and referral business is ten times more profitable to a mortgage broker then plundering individual borrowers.
BTI
Re: Can’t force you to refi, but… foreclosure - Posted by Rich-CA
Posted by Rich-CA on July 08, 2007 at 20:10:36:
With the crash of the sub prime market, tightening of financing, and record foreclosures, lenders are trying to find ways to reduce the future likelihood they will end up with a non-performing loans. Income criteria are in place for a reason.
Just because a loan performs today does not mean it won’t go bad tomorrow. When trying to predict the future they can only play the odds and they cannot assume loans in the “risky” zones will continue to perform. Inflating income hides the risk the lender is taking. They charge more for more risk, to offset the risk of the loan going bad. When you overstate your income, you “steal” the additional interest charged to offset the risk. That is why its a federal crime.
The stated income loan was created to make it easier for good credit risks (high credit scores) to get through all the paperwork, not to make it easier for liars to lie. Yes, they should have expected it given that people have gotten so dishonest that deals can no longer be done on a handshake - at least in many cases.
No, really, they expect you to tell truth - Posted by JT-IN
Posted by JT-IN on July 08, 2007 at 12:31:31:
On those stated income loan applications… and if you don’t you could be in some serious jeopardy; legally and financially.
We are all making lots of assumptions here off of the original post… 2 sentences; 1) Lender said income was overstated on refi last yr; (must have been a cash-out refi too), 2) can they make him refi…? So there is little that we actually know about the circumstances here, but suffice it to say that the lender is in the driver seat. They can foreclose or take legal action for a civil judgment because they have been wronged if he info is incorrect. That specific loan is of lessor value than it would have been, had the income data been correct. If they were to sell the loan, it would sell for less, hence their secured position is devalued.
His main question was, what are my rights…? He has few, actually. His best move is, if he is able to accomplish this is to refi and move the loan from their books. Failing to do so will bring less than desired results.
Many lenders who have loan problems, (default rate too high, excessive over stating on stated income loans, etc.), are under the scrutiny of regulators. They will force a Lender to increase their reserves in order to cover the exposure in these risky loans. This is a big negative for their business model, and will be costly by restricting the amount of new business the Lender can book.
Another remedy might be, if the loan came from a Broker, is to force the Broker to buy back the loan, if they are able. This is a bigger problem than you make it out to be… why should the lender care, because it causes huge business and value problems to their daily business life; or it can under certain conditions. Again, we are all just guessing on the circumstances here.
JT-IN
Re: what are my rights aginst recalling a loan - Posted by Max-Va
Posted by Max-Va on July 07, 2007 at 20:49:47:
Stated income loans were to be for income documentation relief. They evolved into liar loans. According to guidelines a 4506T form is signed at the closing to allow the lender to pull tax returns to check for fraud. In this tightening mortgage market lenders are doing just that. Fraud charges could be filed against you and the loan officer who originated the loan. You probably just were a random audit selection.
My advise, talk to the lender and see what they want to do. Admit nothing but see what they want you to do to straighten this out.
Re: Very surprised - Posted by Ben T
Posted by Ben T on July 08, 2007 at 20:47:59:
Let’s see if we can clarify what seem to be a few issues:
Stated income loans were began to serve the self-employed market. Not people with W-2s. So first, we’re not talking about W-2 income probably. But in the old days you couldn’t use W-2 income unless you had been on the job for a year or two. So if you applied for loan prior to that period, you might have to go stated.
Now here’s an interesting point: you “state” your income…but your tax return is not going to show it. Technically, you “lied” by your definition, and therefore have breached the loan, and perhaps guilty of fraud.
Worse, think about the market this was intended for…the self-employed. The self-employed have several issues. One is that in the old days you couldn’t use self-employment income, even if it was documented, unless you could document it for 2-3 years. If this were the case you would go stated. But this is where the next problem kicks in. Self-employment income may be notoriously hard to define because the owners are trying to MINIMIZE income. And therefore if you only state what APPEARS on the tax return, you don’t qualify for a postage stamp.
In my case my income is real estate related. I pay some loans which are not in my name. Those loans are shown on my tax returns, but not on my credit report. I know loan officers who have recommended not showing either the income or the debt payment associated with these properties since they conflict with the credit report. In other words, the tax returns are not going to compare to the loan app.
I’ve personally gotten loans in the past where I used bank statements to qualify. Here’s how that works. You state an income that can be supported by the bank statements for the last year. Is this supported by the tax returns? No.
I think I could make the argument that there are few purposes for stated income loans IF the income on the loan app must match the income on the tax return.
Ben
Re: Very surprised - Posted by Kristine-CA
Posted by Kristine-CA on July 08, 2007 at 19:38:29:
I’m a little confused by this thread as well. I’ve only gotten stated
income and no doc loans and my understanding was that a
“misstatement” would be considered fraud. But maybe I’m just a
goodie two-shoes.
I don’t remember if there was a “penalty of perjury” statement on any
of my loan docs, but there may have been.
My understanding is that I was paying MORE for the loan than the guy
with W-2 and pay check stubs. Not that I could make up any number
as my income. Kristine
Re: No, really, they expect you to tell truth - Posted by Ben T
Posted by Ben T on July 08, 2007 at 15:41:45:
Actually, you didn’t answer my question. The question was: why would the lender call a performing loan? If you believe they have a devalued position now (because of the misstatement of income), imagine how devalued their position becomes when/if they call the loan, put the borrower in a potential position of default, and potentially have to take a property back which they will later sell at a loss.
Frankly, I don’t think there is an answer here. You are correct in stating they are in the drivers seat. If they choose to proceed with this foolishness, it will be yet a further example of how dumb these lending institutions can be.
You really had to wonder what kind of insanity the lenders were pursuing when they poured the money into these so called stated income loans, KNOWING that borrowers would undoubtedly inflate their income. This knowledge of that misstatement was widespread…and to claim now that they had no knowledge and are harmed is the height of ridiculousness. The bottomline is they put these borrowers in a default position from the moment they signed the loan docs. I wonder if a good, sharp attorney could build a case of this type?
If they were dumb enough though to put these loans out to borrowers that were doubtless not qualified because of income, they further show their dumbness to call a performing loan. Yet, they would certainly have the right.
Ben