The End of Stated Income Loans?
In a little noticed decision,
U.S. Bankruptcy Judge Leslie J. Tchaikovsky let a California couple off the hook for debt they owed their home-equity lender because
the incomes they had listed on their applications were obvious "red flags" that the lender had ignored.
Tchaikovsky rejected the couple's contention that their mortgage broker and the bank had inserted the phony numbers into the application.
But the judge nevertheless said the bank's reliance on those figures "wasn't reasonable"
and held the bank responsible for failing to investigate the couple's finances.
And the impact could extend far beyond the so-called stated-income loans, also known as liars' loans, that have led to many foreclosures.
Credit card lenders, for example, rarely verify an applicant's income when they approve an account or increase a credit limit.
Auto and home-equity lenders often don't check either.
If borrowers can lie on applications and walk away from the debt because the lender failed to investigate, the days of easy credit may be numbered.
U.S. Bankruptcy Judge Leslie J. Tchaikovsky let a California couple off the hook for debt they owed their home-equity lender because
the incomes they had listed on their applications were obvious "red flags" that the lender had ignored.
Tchaikovsky rejected the couple's contention that their mortgage broker and the bank had inserted the phony numbers into the application.
But the judge nevertheless said the bank's reliance on those figures "wasn't reasonable"
and held the bank responsible for failing to investigate the couple's finances.
And the impact could extend far beyond the so-called stated-income loans, also known as liars' loans, that have led to many foreclosures.
Credit card lenders, for example, rarely verify an applicant's income when they approve an account or increase a credit limit.
Auto and home-equity lenders often don't check either.
If borrowers can lie on applications and walk away from the debt because the lender failed to investigate, the days of easy credit may be numbered.
Comments
I don't mean million dollar bonus money. Just enough run a profitable business. "Screw the banks!" might be a great vote-getter, but don't we need them to provide loans and stuff?