On a stated income loan
, lenders agree not to attempt to verify the borrower's stated income, but they will try to verify its source.
In the case of the 2006 vintage delinquencies, additional risk layers that are factoring into the sharply higher delinquencies include high combined loan to value ratios (CLTVs) and stated income loan
programs as borrowers with higher FICO scores tend to be highly levered.
Stated income loans
began as a product designed to facilitate lending to individuals with difficult to document incomes: those working on commission, the self-employed, individuals with incomes that fluctuate from year-to-year, and other nontraditional borrowers.
Also, there are still plenty of reduced documentation and stated income loans
available in the mortgage industry today.
Citi has not originated negative amortization loans, option ARMs, low FICO interest-only loans or low FICO/high loan-to-value stated income loans
in our owned portfolio.
There is a growing need for borrowers' tax documents now that stated income loans
have disappeared," said Jennifer Blacker, the production manager of Homeworx Mortgage, LLC located in Edmond, Okla.
Fitch has revised its loss expectations and downgrade methodology for 2006 subprime RMBS to reflect the higher default risk associated with the stated income loans
, simultaneous second liens and hybrid ARMs, resulting in a higher average lifetime expected loss (EL) projection of approximately 10%.
The Company reported that the increase in losses was related to its practice of extending a three month timely payment warranty that the Company granted to loan buyers who purchased stated income loans
Fitch has previously discussed certain collateral attributes, such as stated income loans
and piggyback second liens that were contributing to the high level of early payment defaults for the 2006 subprime vintage.
stated income loans
with FICO score as compensating factor, and
The report revealed that 'risk-layered' products -- lower FICO, second lien, stated income loans
-- were the biggest loan repurchase offenders.
The settlement was reached after representatives of the financial regulatory agencies and/or attorney general's offices of some of the states raised concerns relating to retail lending policies for the appropriateness of discount points charged prior to February 2003, the accuracy of appraisal valuations, stated income loans
, and oral statements to borrowers relating to loan terms and disclosures.