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News
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AB440
or NRS 598.040-NRS 598D.100 was specifically placed
into law by the Nevada Legislature in 2007. The original intent
behind the bill was good. The intention of the legislature was
to cut down on the numbers of Nevada citizens getting loans
that weren't based on their ability to repay. The legislature
determined that in order to assist its citizens, it would disallow
"no-document" or "low-document" loans that
didn't assure that the mortgagor had the ability to repay them.
An almost immediate outcry came from the Lenders who provided
these products. In Nevada, many citizens are on tip incomes
or self-employed. Self-employed and tip income individuals often
have difficulty with full documentation loans because the documentation
isn't representative of their ability to repay.The law went
to great links to define what a no-document and low document
loan was. No document loans are defined |
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no verification of income. Low Document loans are loans with
a "limited verification" of income or ability to repay.
Commissioner Joe Waltuch wrote a letter in response to lenders
concerns which stated that it wasn't that the loans couldn't
be provided. Instead, he stated, the loans would require that
the lenders do a worksheet or another "commercially standard"
document which would explain to people the cost of the mortgage
and assure that they could make the payments. That paints a
nice picture of a mortgage broker sitting down with his clients
to explain the cost of their new house payment. That analysis
works great for fixed rate loans.Variable rates, balloons, pre-payment
penalties, etc. are another matter entirely.Unfortunately, the
statute doesn't really specifically state what you need to analyze
and how far out the assurance of repayment by the homeowner
needs to be satisfied. The penalty for not doing it the right
way is large. The statute considers giving a stated income,
low doc or no doc loan as an unfair lending practice unless
the lender determines using a "mechanism" that the
borrower has the ability to repay the loan. What does that mean?
If this law affects you, contact us to discuss whether your
verification methods meet this test and what you can do to protect
yourself from unfair lending lawsuits. |
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