With the passage of the Maryland Senate Bill 270, Stated Income Loans will be a thing of the past.

Great thing you say?  Stated Income loans are what got us into all this trouble (well…and subprime loans and ARMS)?  Not so fast.  There really are good uses for stated income loans, mostly being when a borrower is self-employed.  If you are self-employed the only usable income is you net, after deductions from your gross business income, or in some cases money is kept in the corporation which pays the owner a salary (I’m sure there are pleny of other examples, but I’m not a CPA). 

Now, you can say that self-employed persons should not be deducting so much, and it’s their own fault that now they can’t qualify for as much, but let’s take a closer look.   If you are a W2 employee and have a phone for business use, you might deduct this expense from your taxes and it will not effect your income.  If you are self-employed you will claim this as a business expense and subtract it from your gross business income.  This list could go on and on.

Ok…I’m stepping up on the soapbox now….
Frankly, self-employed people already get the short end of the stick when it comes to retirement savings and health care.  Restricting mortgage loans in this way is just another way of hurting the small business owner.  What does this teach us about what our society values? Large Corporations over the small business owner?  Have we lost touch that much with the American Dream?

The better solution is no state income for W2 employees, which is already a policy of many lenders.  This is just one more example of the markets over-reaction to current housing crisis…..in my humble opinion.