Finance
What is a 'stated income' mortgage and why are they rare in post-2010 Pennsylvania lending?
AA mortgage where the borrower states their desired income to qualify for a larger loan
BA loan where the lender relies on the borrower's stated income without independent verification; largely eliminated by Dodd-Frank's ability-to-repay (ATR) requirements✓ Correct
CA PHFA program for self-employed borrowers with variable income
DA Pennsylvania community bank program for farmers with seasonal income
Explanation
Stated income (or 'no-doc') loans allowed borrowers to qualify based on their stated income without documentation. They were widely used pre-2008, particularly in Pennsylvania's subprime market, and contributed to the mortgage crisis. The Dodd-Frank Act's Ability-to-Repay (ATR) rule requires lenders to verify income through reliable documentation before making most residential mortgages. Qualified Mortgages (QM) that meet ATR requirements provide lenders with legal protection; loans that don't meet QM standards carry greater risk.
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