Can you remember the good ole' days of getting a stated income loan in less than a month?

For so long, we mortgage professionals were beholden to Fannie Mae's Desktop Underwriter (DU) or Freddie Mac's Loan Prospector (LP) systems. We would sit with our fingers crossed and prayed that "whatever DU or LP spit out" would be favorable, and all that was desired from either entity was limited documentation.

Even though these systems would generate an approval for borrowers in the absence of tax returns or a W-2, a paystub would still be a necessary evil. The self-employed could only wish to be so lucky.

In my opinion, a legitimate stated income program still hasn't worked its way through the system for a business owner, particularly if they show losses on their returns. As such, business owners will have to wait-and-see if a loan product with a low rate and high LTV (loan to value) materializes. However, a smidgen of various programs with stated characteristics are starting to infiltrate the system once again and breathe new life into our real estate markets.

Previously, we were held hostage by the filing of the dreaded 4506-T upfront. For those who may have never been faced with one, this is the Treasury form whereby a lender can order a copy of one's taxes that were filed with the IRS prior to commencement of the loan process. As you can guess, many people would throw up their hands in defeat immediately, because they knew they wouldn't qualify based on what was submitted to the Feds.

Now, there are programs where 4506s aren't being asked for at all, although many lenders are offering these products on a trial period basis. In addition to the absence of the 4506 form, some lenders are giving the VOE only route (Verification of Employment) a try. For example, in exchange for verifying employment with a solid base salary with an employer, some lenders aren't asking for paystubs or W-2s. Unfortunately, the self-employed, independent contractors, seasonally employed, and commissioned sales people will find qualifying for these programs quite difficult, as the market still isn't ready to roll out products en masse for those with erratic income.

Now, hard money lenders and private money lenders are advertising "stated programs," but for most of us, it is almost a given that they’re using stated income anyway, as these decisions are based mostly on equity in the property and the net worth of the borrower.

Given today’s problems in the conventional mortgage market, many hard money and private equity folks are requiring more documentation for their funds. Accordingly, a distinction needs to be drawn between a traditional hard money source and a stated income player even though their rates and terms may be substantially the same.  For the self-employed, a true stated deal is still most likely to be found in the hard money arena as opposed to the "conforming" market. Hopefully, things will change.

Therefore, the stated program is starting to make a comeback. It’s moving at a slow pace, but we are starting to see improvements in the marketplace as different lenders and facilitators from Fannie Mae and mortgage companies experiment with different ways to get deals done without taxing the borrower with every conceivable piece of information under the sun.

I imagine that true stated products for self-employed, cash rich but tax return poor borrowers will also return because the market will demand it. For now, it's just a wait-and-see game as lenders experiment.

Eventually, we will once again have products that fill the needs in our real estate marketplace, which makes things happen and gets deal closed. I am content with waiting for that 100% No-DOC program to come back, where all I needed was a client with a high FICO and a heartbeat to get a buyer’s $1MM dream house. . . can you say NOT HAPPENING!

Preston Howard is a mortgage broker and Principal of Rose City Realty, Inc. in Pasadena, CA. He can be reached at howardpr@rosecityrealtyinc.com