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Post a Comment On: Steve Sailer: iSteve

"Does Liar Loan = Tax Evader?"

11 Comments -

1 – 11 of 11
Anonymous rightsaidfred said...

or live a life of crime.

??? Someone at MSN wrote this with a straight face? Monty Python could not be funny today with daily life so beyond parody.

9/6/09, 5:43 PM

Anonymous Anonymous said...

"Someone who gets a stated-income mortgage must disclose annual earnings, usually for the last two years and sometimes more. Instead of backing up the income statement with pay stubs and W2 forms, the borrower might have to show tax returns, bank statements and even profit-and-loss statements." If we had bank statements and tax returns that showed they made the money, this was just another full doc loan.

It has been over 15 years since I worked in lending (including the early subprime which we called "A- through D" at the time), but what you are describing as a "Stated Income" loan was something we would have processed as standard Freddy/Fannie/FHA. I even took a class on how to go through someone's tax returns, P&L, etc to allow an underwriter to see someone's real cash flow (back out depreciation, non recurring expenses, subtracting the non deductible portion of entertainment expenses, etc).

9/6/09, 6:48 PM

Anonymous Andrew Ryan said...

"Does Liar Loan = Tax Evader?"

Yes. My brother-in-law has a no-doc loan b/c he is a self-employed contractor who gets paid in cash and reports minimal income to the IRS.

The amount of tax evasion that occurs is astounding. I have family in catering that will openly give their clients a discount for cash payment b/c they won't report the income. When I had work done on the AC in my house they quoted me a reduced price for cash over the phone.

The other interesting aspect of cash businesses is how often they are involved in laundering drug money. I delivered pizza for a place that later became a major drug distribution center.

When I tell people these stories they are shocked. I often think you average college-educated American is painfully ignorant of how seedy and criminal much of our society is.

9/6/09, 7:52 PM

Anonymous Bill said...

I can see divorced men who hide much of their income from their ex-wives using these.

CS/alimony laws are punitive enough to drive a good portion of this, I'd guess. For example, if a guy has a variable income and his ex manages to fix a monthly CS payment on the high end, he's screwed. If he can cut his reported income as much as possible to avoid that, he might enjoy a somewhat better lifestyle, but he's going to be forced to hide anything extra so as to keep her from taking him back to court and increasing his obligations.

Probably most contractors who buy and renovate houses get divorced. Every single one of these guys I've known who was foolish enough to get married ended up divorced (the wife has an incentive due to the property).

9/6/09, 7:54 PM

Blogger John Seiler said...

One of the things that needs to be studied is the shift in lending from your local bank or S&L, folks who knew your rep in the community or could find out, to a nationalized, faceless system -- typically somebody who knows you only by phone; somebody who, if you're a foreigner, likely speaks your language as a native.

9/6/09, 8:15 PM

Blogger John Seiler said...

Another consideration is how bad this housing disaster -- and the deepening Depression - would be if we had been on the gold standard, with gold pegged at the 1981-2001 average of $350/ounce begun by Reagan and Volcker. Since 2001, under the Greenspan-Bush-Bernanke-Obama inflation, gold's price has nearly tripled, to $992 on Sept. 6. I suspect the housing and other economic problems would be much less and we would be in the recovery stage right now.

Instead, nobody knows what the value of the dollar will be a year or 5 years from now, so economic planning, for families or businesses or governments, is made much more difficult. There will be no recovery until the Fed indicates it will no longer inflate. (Better yet, as Ron Paul titles his new book, "End the Fed." Since the Fed was undemocratically and unconstitutionally imposed on us in 1913 -- when gold was $22/ounce -- it has been mainly an engine of inflation. From $22/ounce in 1913 to $992 in 2009 is a vast robbery of wealth from Main Street folks to Wall Street speculators.)

9/6/09, 8:30 PM

Anonymous Roger Chaillet said...

I worked in the mortgage industry just a few years ago. Steve and others would be amazed at the obscenely high credit scores of immigrants, specifically Hispanics. Many would have really high scores. It wasn't because they had much credit; it was mostly because they would have a car or truck loan. They would always, always, always make payments on their vehicles. I would compare the vehicle note payments to housing costs, and discover the note payment was as much or more than monthly rent on an apartment or house!

So, a self-employed Hispanic contractor with a good credit score could easily obtain a stated income loan even though his income was grossly understated.

But this only worked as long as the credit bubble fueled the housing market here in Texas and elsewhere.

I remember one Mexican couple from a small town near Corpus Christi. Adjusted gross income per their tax returns was just over $3,000 per month. The note they wanted to re-finance was around $2,000 per month! The couple "earned" so little money that they received earned income credits for their two daughters. The husband spoke so little English that I almost always spoke with his wife. He was a self-employed general contractor. I could not get the loan done. Once a borrower disclosed income a loan could only be done as full documentation loan and not a stated income one.

9/6/09, 10:11 PM

Anonymous Bill said...


unnamed financial institution focusing on the "low documentation" mortgages


I wonder if there are any financial institutions which focused on low doc loans and which are also listed in boldface on this webpage?

9/7/09, 10:05 AM

Blogger David said...

>how seedy and criminal much of our society is.<

It's the high-tax government that's seedy and criminal. Blaming evaders often means blaming victims. (No advocacy of tax evasion or black market activity implied. Hail Obama!)

9/8/09, 7:04 AM

Blogger David said...

> There will be no recovery until the Fed indicates it will no longer inflate. (Better yet, as Ron Paul titles his new book, "End the Fed." <

How will we defend Ohio from Iranian A-bombs if we don't have ever-larger appropriations for the military, to invade and bomb ever-larger areas of the earth? Ruling the world isn't cheap, y'know. Don't forget that the source of wealth is the destruction of people and capital goods.

9/8/09, 7:11 AM

Anonymous realtor in Vancouver said...

Hello and thank you for your post. The biggest problem is that people do not realize that if they continue taking loans and borrowing money, the situation never will be better. The more loans they get, the more in debt the country is and the more "housing bubbles" will appear.

Take care,

Jay

9/26/09, 6:24 PM

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