Are Stated Income Loans Illegal?

Are Stated Income Loans Illegal?

Are stated income loans illegal? One of the many causes of the phenomenon known as the “housing bubble”, (1) was the stated income loans (2). To deal with the collapse of the housing market, the Obama Administration passed the Dodd-Frank Act (3) which prohibited the institute of the aforementioned loans where the condition of eligibility for the borrower was the formal declaration of his will and ability to pay the contractual obligation (4). However, some years ago, this Act was partially dismantled (8) by the S.2155 (5) that rolled back a good part of it (6) without actually repealing it (9),  because of the severe problems it was generating to our country (7). As a consequence thereof, we can say that stated income loans are back, but with variations that we will explain easily based on the new reforms (10).

So today, after these reforms and rollbacks, are stated income loans illegal?

Stated income loans are illegal now only for owner-occupied properties after the Dodd-Frank financial reform was passed in 2010. Therefore, they are legal for real estate investment because in these cases, the borrowers are not purchasing owner occupied property.

Thus, it is now illegal for any prospective borrower to obtain a stated income mortgage loan for an owner-occupant property. However, they are allowed in the case of borrowers purchasing a real estate object for investment purposes that will not be occupied.

Today, stated income loans require proof of income, but you can use bank and financial statements to prove your ability to pay.

You cannot buy a house for living without proof of income, as this is prohibited now. Today’s stated income mortgage still requires you to prove your income, but you can do so with bank statements rather than traditional documentation, such as W-2s, pay stubs, and tax returns. We discussed in another article, how is the situation in California regarding the non-QM market in this article.

 They come in various names (e.g. “no-doc”, “low doc”, “SISA”, etc.) Depending on the state, current regulations, and even to the extent of the uniqueness of a population’s needs, stated income loans can be quite flexible, thus offering a viable choice for those with equally unique financing needs.

What Legislation Made Stated Income Loans Illegal?

The legislation that made stated income loans illegal was the Dodd-Frank Act, partially rolled back in 2018 during the Trump Administration.

Conclusions

The recommendation is to prepare a range of bank statements covering not less than a timeframe of six months 

Related Loan Types

There are some related loan types that you can read here.

We have two articles that recently became viral about direct cash loans and faxless cash advance loans.

I would like to recommend to you some featured articles about short term cash advances with almost guaranteed approval, $300 loans, no teletrack payday loans, tribal loans without teletrack, loans for Doordash and Uber drivers, and which are the payday loans online lenders that do an instant approval without a credit check.

We also have short-term loans for unemployed borrowers granted in just one hour, quick cash loans without a bank account, emergency loans to pay the rent, registration loans, and small payday loans online. We answer the question of whether you can have two payday loans at once and if there are specific loans to pay utility bills.

In regards to car title loans, I describe how to obtain a car title loan without income verification, and even without showing your car. We inform you how legally get out of a title loan, what is title pawning, which car dealerships accept negative equity, and why are car loans always secured with a collateral asset that is the car itself.

We have an online loan with no bank verification, bad credit installment loans, payday loans that accept MetaBank, loans for single moms, completely online loans with no phone calls required, fast loans direct from the lender, payday loans that accept prepaid accounts, installment loans with bad credit issued directly from the lender, no-verification payday loans from direct lenders, loans issued without the need of an ID, loans that offer the same or even better conditions than Cashnetusa, and online Flex loans issued by direct lenders.

Also, Flex loans online in general, high-risk personal loans with guaranteed approval from direct lenders, $255 payday loans online for California, guaranteed installment loans for bad credit from direct lenders only, online loans from direct lenders, tribal installment loans from direct lenders, and no credit check, and payday loans for unemployed on benefits.

Other Loans

We have articles discussing other loans, some traditional, and some subprime loans: stated income loans in general, and their particular situation in California. We also discuss if they are still legal or not.

Getting a mortgage loan only with an ITIN, no doc hard money loans, hard money construction loans, luxury home financing, no ratio loans, and what happened with Funding For Flipping.

Photo of author

J Lipsky

Hello, I am John, born in Cedar Rapids, but lived a lot of years in Latin America. I am an economist and have specialized in credit and debt. Originally sovereign debt, but later on, in personal loans ranging from mere payday loans to FHA mortgages and complex business loans with different stages, passing through hard money loans and auto title loans. I write for many publications. Here in eCreditDaily, I write about personal loans but I also write for other websites and bulletins about inflation and country risk.

Leave a Comment

Contact

54122 Dev Drive
New York, NY 10060

+Call Us
Contact Us

Connect

Subscribe

Join our email list to receive the latest updates.

General Information: eCreditDaily.com is not a lender or representative of any lender or service provider, does not make any loan or credit decisions, and is not implicated in any way in the lending process.

Loan Request Terms: eCreditDaily.com is intended to function as an advertising referral service and serves as a connecting platform between its users (who may be potential borrowers) and qualified participating lenders.

eCreditDaily.com does not oversee or regulate and is not responsible for any actions of any lender. The offers, loan terms, rates (including APR), fees and charges, loan amount, cash transfer times, repayment terms as well as any legal implications for late or non-payments are within the full responsibility and control of the particular lender that provides the loan service.

State Regulations: Loans and loan services are not available in all states or jurisdictions, consequently, residents of some states may not be able to apply for some or all online loans.

Credit implications: Any participating lender may perform a credit check prior to making any credit decision. This action might involve contacting the credit reporting bureaus in order to determine the applicant’s creditworthiness, credit standing, or credit aptitude.

Borrowers Beware: Short-term lending is intended to be used to address short-term financial needs and does not constitute a long-term financial solution. Short-term loans involve costs to the borrower and may potentially worsen the precarious financial situation of the latter. Potential clients might consider consulting a finance professional to obtain advice about the risks involved with short-term loans and available alternatives.

Loan Approval: The submission of an application for a loan does not guarantee the approval of an applicant for any offer. By using this website, the user acknowledges that they have read, understood, and agreed with Terms of Use, Privacy Policy, Rates, Disclaimer.