“Asset Distribution” type loans, the new stated income loan alternative?

The Senate recently voted to ban all “stated income” loans.  Several lenders are currently evaluating alternatives where applicants have a substantial asset base. 

 This type of loan will be an “Asset Distribution” type loan. 

 It may allow individuals with high asset bases to obtain financing even though their tax returns do not substantiate the income needed to qualify.

What do you think of this concept? I have always maintained that if a borrower has a substantial interest in a property (20% or more), the likelihood of them defaulting decreases. Plus a 20% equity position allows for a seller to bail out if needed  if the market values  were to drop by 10% . Of course the higher the equity postion the better- an owner with 50% equity or more would be highly unlikely to default. And what is wrong with asking a high asset base borrower to cough up 20%, 30% or more down payment ?

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1 Comment

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One response to ““Asset Distribution” type loans, the new stated income loan alternative?

  1. Mike

    Sounds like a good idea to me, many people are capable of saving significant portions of their incomes and have asset values that are disproportionate to their income level.

    Currently HUD requirements are income based and don’t consider the asset value a customer has.

    Many people in retirement fit this bill also.

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