No Home Loans for Self-Employed

taxidriver_wideweb__470x310,0 New Orleans The draconian back door assault on citizen wealth continues as the impacts of new credit rules ripple through mortgage market and deny motivated – and qualified – buyers access to loans.  A quote in the Times today is revealing:  “Stuart Fraass of Guaranteed Rate Inc. ‘If you’re self-employed, you have virtually no chance of getting a mortgage now.’” Does this matter:  Hell, yes!  There are 20.4 million American workers that are self-employed!

In recent years sitting across the table from banks and sub-prime lending companies, we had this argument frequently over what was called “stated income” loans (I cover this at more length in my book, Citizen Wealth). Stated income allowed the potential borrower to prove their income in a variety of ways that substituted for the simple and standard W2 that a direct employee could provide.  This allowed tipped employees as well as self-employed workers to prove their incomes without W2’s.  The fact that many of the companies did virtually nothing to supervise the broker networks “manufacturing” of stated income loans was the problem (New Century had half of its portfolio in stated income loans right before the collapse!), not the existence of the loan itself.

The casualization of the workforce has increased the number of workers in self-employed categories along with the arcane definitions in labor law.  Not only do these self-employed categories include fancy jobs (though not necessarily high paying) as artists, musicians, consultants, and investors, but also straight forward jobs like taxi drivers, construction workers, many healthcare workers, some hospitality workers, and a pile of others.

Of the more than 20.4 self-employed workers (and even with the most modest family calculations we could double or triple the impact here), some already own homes, but for those attempting to access the assets to create citizen wealth, this arbitrary credit refusal is unjust, inequitable, and bad public policy.

Fannie Mae seems to be part of the problem here.  David Streitfield’s article includes this:

A Fannie spokesman, Brian Faith, said tighter regulations screened out those unprepared to be owners.

“One of the important lessons learned in the past few years is that it is not enough to help a borrower own a home,” Mr. Faith said. “We must also help ensure that they will be able to stay in the home over the long term.”

If there is a prize for gratuitous and meaningless statements for the day, then here’s to Brian Faith!  Not only were these NOT the lessons learned in the “past few years,” but even arguably if they were, Fannie and the rest of the gang are doing NOTHING to “help ensure” folks who want to own and are qualified to somehow achieve sustainability and security “over the long term.”  Please send me a copy of THAT program and its non-existent guidelines?

In the meantime, as I often say, “there’s no substitute for good judgment,” and that’s supposedly what these folks collect fees and interest to exercise.  Get at it!

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