Many lenders touting so-called safe origination practices for loans made outside the legal safe harbor for “qualified mortgages” are relying upon practices that are simply insufficient to protect them legally. Most are using approaches that focus upon one particular area of risk (ignoring the others). In some cases lenders are also using “safeguards” that regurgitate old protections that did not work before and will not work in the future. For instance, lenders relying upon 24 months of bank statements to verify income on a non QM loan may well be guarding against claims that the lender did not verify income. However, if the borrowers’ true expenses are not accounted for, the income-based verification will not establish the ability to repay as it examines only one part of the equation.
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Ari Karen is an experienced litigator and speaker who has focused his practice in representing financial institutions in both government investigations and litigation before state and federal trial and appellate courts nationwide.
Mr. Karen’s practice is diverse, representing clients on matters concerning banking regulations, Dodd Frank financial reform laws, contractual disputes, employment and labor statutes, wage-hour class actions, employment discrimination and fair lending matters, whistleblower complaints and non-competition claims, among others.