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Fannie And New Risky Lending

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A K

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Jul 31, 2013
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Certified Residential Appraiser
State
Maryland
Needs details.
 

Randolph Kinney

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Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
Lenders have been tougher on income from side businesses and part-time work since the mid-2000s, when poorly documented income claims on mortgage applications helped fuel the housing bubble.

Airbnb, which launched in 2008, argues that its service includes reliable technology to track income, and that it is helping middle-class Americans stay in their homes by giving them a way to generate additional cash.

The whole big idea behind Airbnb ... was how could people unleash or capture the value of the home that they were in.

The mortgages will be backed by Fannie Mae, an acknowledgment that Americans today increasingly are earning money through the "gig economy, " such as renting out rooms or ride-sharing.

"Rental income on your own home is something that 10 years ago we almost never saw," said Jonathan Lawless, vice president of customer solutions at Fannie Mae. "The fact is that we're seeing this much more commonly across the country."

Still, the move raises worries about encouraging homeowners to borrow more based on the unpredictable tourism industry.

https://www.marketwatch.com/story/lenders-to-allow-airbnb-income-on-mortgage-forms-2018-02-08

Borrowing the equity out of the home using unpredictable short term room rental income is not like a salary. It just means there is more risk of default without a secure income to service the increase in debt.
 

Elliott

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Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
So some one at FHFA is okay with this? Because these are a "house" its okay for GSE's to loan on a business enterprise, most likely in violation of zoning or HOA regulations? Seems a misuse of the federal mortgage mandate policy. Unless someone hasn't noticed there is a lack of affordable low income housing and there is a problem with homeless in virtually every community in the nation.
 

Riick

Elite Member
Joined
Aug 14, 2007
Professional Status
Certified Residential Appraiser
State
Delaware
Borrowing the equity out of the home using unpredictable short term room rental income is not like a salary. It just means there is more risk of default without a secure income to service the increase in debt.
Almost as bad as relying on the income from a one-man show business to pay off a mortgage.
Not that micro-businesses -like most appraisers run- are a risk or anything, :)
 

J Grant

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Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
I started a thread on this a few weeks ago...many posts on it. No indication at least that we know of that the property will be evaluated as an income property -so far it just looks like they will consider Airbnb as another source of borrower income

Quicken Loans is leading the way! So Fannie is following and allowing it in UW. Fannie's decisions lately look like they are rolling the dice in a casino for higher and higher risk, putting speed and marginal policies first, in some lame attempt to seem hi tech relevant to the new gig economy . Guess it escapes their notice that UBER is losing money and airbnb is being outlawed in many areas. No matter, Quicken Loans/other lenders wants it to qualify more borrowers so they can make more loans.

After all, it is the poor millennial who often turn to the gig economy thanks to the lack of "real" jobs. So why not qualify their source of shaky income to get them deep into debt, granting them a mortgage on a property maybe they can't really afford, pile it on along with student loans or whatever else they are struggling with.
 
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Elliott

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Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
Short of getting an audited, signed P/L from a CPA, what guarantee is the numbers submitted as gross revenue and expenses are accurate? Once you've done 20 of them, you could probably smell them out, but to hit the ground running on the valuation of diverse vacation rentals is not a good idea for lenders or appraisers, IMO.
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
Short of getting an audited, signed P/L from a CPA, what guarantee is the numbers submitted as gross revenue and expenses are accurate? Once you've done 20 of them, you could probably smell them out, but to hit the ground running on the valuation of diverse vacation rentals is not a good idea for lenders or appraisers, IMO.

There is zero indication, so far, that appraising these will involve anything different for the appraiser. What I read of the program, they are being treated as residential properties. So it seems from what we know at this point to be all about the lender using it for income to qualify the borrower. We can vent our opinions about such lending practices but unless it spills over into the appraisal, will not affect us. If they ask for income /expense statements or comp rentals it would affect us, but it seems from what I read about the program ( type in quicken loans/air bnb income) it is about income qualification. .

When we appraise a property now, we don't know if borrower's income was from a corporate job or a patchwork of freelance part time $. Either way would no affect our valuation of the property.
 
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