Mortgage Blog

Why we need more loan documents now?

January 4th, 2017 1:23 PM by Eric Fang

I am doing a refinance for a client, who happens to make very good income, and for a small loan. But lender still asked personal tax returns, business tax returns, K1s, etc.
And I had to explain to him why the lender still needs those documents even though he is "over"-qualified.

1)The loan process/history and files needs to be documented. This is for the book keeping and audit purpose. Some files will be audited internally. And we also need to keep the files for a few years for the government/regulator auditing. So we need to have all those required documents. Tax returns and/or K1s are part of the income documents.
And that borrower has a loan on the paystub, then it is normal for the lender to ask the loan related documents, just because this loan is a debt.

2)Most of the loans will be packaged and sold to the investors on the bond market. The investors need to know borrower's income/assets/debt info. I know during 2005-2007 years, some subprime lenders can do the loans with no income no assets. But not now.

3)Lenders will also keep the documents to prove that they made the right decision when they qualified your loan. And those documents are the proof. They need to those to avoid future lawsuits. They will lose without them.
Posted in:General
Posted by Eric Fang on January 4th, 2017 1:23 PM



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