Jim Anderson, Compliance Officer, Carteret Mortgage

A: We spend a good amount of time in our three-day school within the areas of the laws and ethics. It is my opinion that more than 50% of the predatory lending that occurs in the industry does so because loan officers are not properly trained and not because

Generally, stated income means they state their income and we don't verify. They are still attesting to it and if the income is not there, you are talking about fraud. No ratio means we don't care what they make--so the income is not even stated. This is the way to go when you really do not have the income necessary to qualify.

When you get into self-employment or other complex situations, there may be flexibility when it is hard to "prove" the income, but the applicant states it is there. For example, we require a two-year average. But if they can say that this is what their present income is--there is no way to fully apply the two-year average rule because we don’t have the returns so we must take their word for what constitutes two years. Since we are not viewing tax returns—our methods of adjusting the income in accordance to our standards also must be left up to the applicant. Or perhaps the tax returns are just too complex. Basically, if they are comfortable going into a court of law and attesting to this income, then they can state it.
                                                                         
With regard to sources of income that generally cannot be used—if you have to change the “type” of income in order to state it—this is also fraud. I will add—when the lender’s quality control department uncovers this fraud (which they will do in a certain percentage of cases)—they will call the applicant. And do you know what the applicant will say? The loan officer told me to say that! I know, because I have made those calls. It is not worth risking your career.

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Dave

Dave Hershman is the leading author for the mortgage industry with eight books and several hundred articles to his credit. He is also head of OriginationPro Mortgage School, the most advanced comprehensive curriculum in the industry, and is a top industry speaker. For more articles by Dave, free marketing materials and a schedule of classes, visit www.originationpro.com.