Dodd Frank Financial Reform Bill

The Financial Reform Bill HR4173 signed into law by President Obama on August 1, 2010 made stated income and no doc loans illegal *.

Section 1411 of the bill says:

''(4) INCOME VERIFICATION — A creditor making a residential mortgage loan shall verify amounts of income or assets that such creditor relies on to determine repayment ability, including expected income or assets, by reviewing the consumer's Internal Revenue Service Form W–2, tax returns, payroll receipts, financial institution records, or other third-party documents that provide reasonably reliable evidence of the consumer's income or assets…"

The new law does allow exceptions to this rule for HUD, VA, USDA and Rural Housing Service loans.

Specific Organizations Opposing H.R.4173

  • National Association of Federal Credit Unions
  • American Bankers Association
  • Independent Community Bankers of America
  • US Chamber of Commerce
  • National Association of Mortgage Bankers

* It is illegal for mortgage lenders who insure loans (basically the big banks) to offer stated income loans. There are portfolio lenders and regional banks who will still offer these low or no doc loans that are uninsured.