The Death of Stated Income Loans

is quickly drawing nearer and nearer. Put another nail in the coffin; courtesy of IndyMac Bank.

IndyMac released another round of massive product changes that specifically focus on making the “liar loans” stated income and no income loan products completely irrelevant to the majority of lending situations; and especially for anyone firmly planted in the Alt-A camp.

They also eliminate some of the more “affordability” type products including the 40 year amortized loans.

From an IndyMac announcement to brokers:

Guideline Update

In response to recent liquidity issues in the secondary mortgage market, we have found it necessary to make additional revisions to our program limits and guidelines:Alt A Conforming and Non-Conforming First Mortgages: No Income / No Asset and No Doc Documentation Types - The maximum LTV / CLTV is limited to 80%regardless of minimum Decision Credit Score. - The maximum LTV / CLTV is limited to 70% for Decision Credit Scores of less than 700. Stated Income and No Ratio Documentation Types - For Purchase and No Cash Out Refinance transactions, the maximum LTV / CLTV is limited to 80% for Decision Credit Scores less than 660. - For Cash Out Refinance transactions, the maximum LTV / CLTV is limited to 70% for Decision Credit Scores less than 660. Investment Property Transactions - The maximum LTV / CLTV is limited to 80%regardless of minimum Decision Credit Score. - The minimum Decision Credit Score for any investment property transaction is 660. 40 due in 30 Products All 40 due in 30 Products have been discontinued. 3/1 LIBOR and 3/1 LIBOR Interest Only Products The Lender Insured mortgage insurance option is no longer available for these Products.

Stated income loans at high loan-to-value ratios have been a major source of abuse over the last few years by lenders and brokers. It is a loan that has put a large portion of the home buying public in jepoardy of losing their homes - wittingly or unwittingly. It needs to go; or it needs to be heavily curtailed - and we’re definitely seeing that.

This will definitely cut off the stated income escape hatch many people were relying on to get out of a soon-to-be adjustable loan; and should pad the foreclosure numbers in the coming 18 months.

What do you think?

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[Source: Blown Mortgage]