Effective for applications taken on or after June 1, 2008, Maryland has passed into law changes to their Interest and Usury Provisions. Starting June 1, 2008 lenders making mortgage loans secured by property located in the state of Maryland must give "due regard" to a borrower's ability to repay a mortgage loan in accordance with the terms of the mortgage loan.
Under this law, a lender must consider the borrower's debt to income ratio, including existing debts and other obligations. A lender must also verify the borrower's gross monthly income and assets by review of third party written documentation. Acceptable third party documentation is also defined in the law as a copy of the borrower's tax return, W-2, payroll receipt, records of a financial institution, or other third party documents providing reasonably reliable evidence of the borrower's income or assets.
This means no more stated income, reduced documentation or No Doc loans in the state of Maryland. It also means that we can’t do reduced documentation, even for those people with large down payments and great credit scores. I used to be able to not get any documentation, making their lives easier, but the State of Maryland now requires that all people provide income and asset documentation.
The important thing to realize as everything becomes more difficult, is that while we used to be able to get almost anything done, even if it meant switching it to a No Doc or sub-prime loan, now it is much more important to make sure that all documentation is verified up-front and that the loan is guaranteed to be approved, because if it doesn’t work, there is no back-up alternative.
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