Mortgage Crisis – Verification of Income is Necessary

Well, the answer is the financial industry must determine a borrower’s capacity to pay and now new rules will force borrowers to prove their ability to pay to prevent mortgage defaults and 먹튀사이트.

During the real estate boom unscrupulous mortgage brokers, lenders and borrowers often distorted income or assets, forged documents, inflated appraisals, and misrepresented a borrowers’ intent to occupy a property. Until recently, borrowers could just state their income. Loan brokers would often help tweak the numbers to make a no income verification or ability to pay check loan work. This has caused unqualified borrowers acquired homes they couldn’t afford.

Worse still, when a bank would ask for income verification, there would really be no assurance that the documents were accurate. Many risky mortgages in the “suprime” subsector were approved during the past few years without any proof of income and without checking the ability to pay. For a topic to be discussed later there was quite a bit of document manufacturing that was occurring. Simultaneously, reduced-documentation loans became more popular in the country.

Mortgage originators were not paying attention to these unscrupulous home loans and the borrower’s capacity to pay because they could sell these mortgages easily. It ultimately ended up being financial “hot potato” because whoever is holding these loans now are becoming insolvent and sinking the banking industry.

The U.S. financial industry now needs stricter regulation regarding income verification for all mortgages. This lack of regulation has caused historical default and foreclosures records in states such as California, Florida and Nevada. Now 65% of all foreclosures in the U.S can be traced back to those three states. Since year 2005 these 3 states showed the highest default and foreclosure rates in the United States. Lenders should spend more time verifying a prospective borrower’s income and employment.

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