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WEDNESDAYS • Sept. 5, 2018
Richmond & Hampton Roads
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Bipartisan push begins in Senate to expand mortgage access for self-employed borrowers
Ever since the Qualified Mortgage rule went into effect a few years ago, borrowers who don’t have a traditional source of income have had a hard time getting a mortgage. Well, a bipartisan push is now underway in the Senate that could change that. Last week, senators Mark Warner, D-Virginia, and Mike Rounds, R-South Dakota, announced legislation designed to make it easier for self-employed borrowers to get a mortgage. According to Warner’s office, the “Self-Employed Mortgage Access
Act” would help creditworthy borrowers with non-traditional forms of income qualify for a mortgage by allowing lenders to verify a borrower’s income using additional forms of documentation other than the W-2. “An increasing number of Americans make their living through alternative work arrangements, like gig work or self-employment,” Warner said in a statement. “Too many of these otherwise creditworthy individuals are being shut out of the mortgage market
New beginnings From “current and meaningful” to “so glad to have this in my neighborhood” to “I hope it’s temporary”, Richmonders have not been shy about expressing their glee and/or displeasure at the recently renamed former J.E.B. Stuart Elementary School. This week marks the first week in the new school year with the elementary school now named after the 44th president of the United States, Barack Obama. It was, until June, Richmond's only Confederate-named school.
U.S. Sen. Mark Warner because they don’t have the same documentation of their income – paystubs or a W-2 – as someone who works 9-to-5,” Warner continued. “This bill will allow these workers to supply other forms of paperwork to verify their income while continuing to protect consumers from predatory lending.” The issue, said Warner and Rounds, is the stringent lending standards stipulated by the Abilityto-Repay rule and the QM rule. “Since the QM standard was finalized, lenders and investors in the mortgage market have shown a clear preference for QM loans due to the potential for liability associated with making non-QM loans,” the senators note. Under those rules, unless a loan is eligible for sale to Fannie Mae or Freddie Mac or insurance from one of the government agencies (Federal Housing Administration, for example), QM loans require lenders to satisfy the “rigid requirements” of the CFPB’s lending guidelines, Warner’s office notes. Those guidelines, referred to as Appendix Q, often lead to a “less
precise calculation of income for borrowers with non-W-2 income sources, such as rental income, retirement income, or income from self-employment.” According to Warner’s office, the effect of that imprecise calculation is that many creditworthy individuals who rely on non-traditional income (as many as 42 million Americans or 30 percent of the labor force fall into this category) are “unduly constrained” in their ability to get a mortgage. The “Self-Employed Mortgage Access Act” would expand the types of documentation that selfemployed individuals are allowed to use to show they are creditworthy, while also expanding the types of documentation that banks could use to keep a loan in QM status. Under the “Self-Employed Mortgage Access Act,” the IRS Form 1040 Schedule C for sole proprietorships, the IRS Form 1040 Schedule F for farming, the IRS Form 1065 Schedule K-1 for partnerships, and the IRS Form 1120-S for S Corporations could all be used when determining a borrower’s income. “Small businesses... are the backbone of our economy and the heartbeat of our communities,” Rounds said in a statement. “We shouldn’t unfairly punish entrepreneurs, farmers and other small business owners because they don’t earn income on a W-2. “Our legislation gives financial institutions flexibility in the forms
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