A letter to my mortgage loan officer

I was unaware until this past week that residential mortgage lending rules had changed so sharply in recent months to now essentially preclude many self-employed people with a good credit history from qualifying for a mortgage loan. Fortunately, it seems like the impact of the adverse rules will be short-lived, according to the latest coverage in the Wall Street Journal.

This is the letter of inquiry that I sent to my mortgage loan officer.

“I considered your suggestion that I should remove myself as an owner on the property deed and not be listed as a borrower on the proposed refinance of our home mortgage loan with my wife despite the fact that my higher cash flow was the sole source of the purchase money down-payment of the house and remains the primary source of the loan repayment. You felt that an otherwise credit-worthy self-employed person who uses the common tax management strategy of “zeroing out” gross receipts with tax-deductible expenses could hurt a mortgage application of a spouse with a normal W2 income. It struck me as an odd suggestion to be making to a borrower with a long history of successful home ownership and mortgage repayment history with your bank. It seemed even more strange considering that I purchased this home on my own without another person and I made the mortgage payments on my own for so many years.

This triggered me to do a little research on the underlying  mortgage lending rules to learn why this suggestion was being made. I concluded that the new CFPB Qualified Mortgage regulations implemented in January of this year effectively made many self-employed and commission-based workers unable to qualify for the best mortgage credit even if they have strong credit scores.

Apparently these new proposed eligibility rules for Fannie and Freddie Mac borrowers that are expected to be finalized in the next six weeks will remove this barrier for self-employed borrowers, according to the latest coverage in the Wall Street Journal. Presumably this loosening of requirements will filter down to your bank’s eligibility rules for a home mortgage refinance.

 Given this political environment, does it make sense for us to wait?”

I hope that in six weeks I will no longer be shut out of the mortgage market.