Reply #7: Yes, in terms of stated income loans, and not far enough in terms of abuse of that product.

[Gormy Cuss]

Stated income loans served a useful purpose for some self-employed people. Before them it was often the case that the newly self-employed wouldn't be approved for loans even when their overall financial picture was healthy. That said, there's no excusing the abuse by brokers who suggested this product as a way of qualifying for a bigger mortgage and no excusing for the borrowers who lied in order to qualify either. Implementing stiff penalties would address those behaviors while preserving this option for the few who do need to qualify for a less than traditional mortgage. Stated income usually have higher interest rates and fees which are sufficient for the slightly higher risk when the applicant is honest.