As consumers increasingly accept nontraditional jobs and move away from standard, well-documented income patterns, mortgage lenders are faced with an old dilemma taking on a slightly new form: whether loans made from bank statements documenting a borrower’s cash flow into and out of their bank accounts are safe. With many things these days, the answer is that it depends.
Theoretically, a bank statement loan can be sufficiently documented under the ability-to-repay rules, depending on the underwriting and reasonableness of the assumptions relevant to the approval. However, lenders are increasingly adopting assumptions for evaluating bank statements that are extremely vulnerable to attack under the ATR laws. These assumptions ignore realities, or uniformly apply standards, that are in many cases erroneous and overstate income.
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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.
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