Bill to expand self-employed access to mortgage introduced in Senate

by Francis Monfort29 Aug 2018

New legislation introduced in the Senate would allow mortgage lenders to use forms of documentation other than the W-2 in verifying the income of self-employed applicants.

Sens. Mark Warner (D-Va.) and Mike Rounds (R-S.D.), both members of the Senate Banking Committee, introduced the bill to expand mortgage access for the self-employed, gig workers, and other creditworthy individuals with non-traditional forms of income.

Under the Self-Employed Mortgage Access Act, self-employed individuals could submit documentation including the IRS Form 1040 Schedule C for sole proprietorships, the IRS Form 1040 Schedule F for farming, the IRS Form 1065 Schedule K-1 for partnerships, and the IRS Form 1120-S for S Corporations to demonstrate they are a credit-worthy borrower. The bill also allows banks to use these additional documents to keep a loan in qualifying mortgage status

The bill responds to constraints on the ability to obtain a mortgage of up to 42 million Americans, or 30% of the labor force, who rely on non-traditional income. The senators said that current guidelines often result in a less precise calculation of income for borrowers with non-W-2 income sources, such as rental income, retirement income, or income from self-employment.

“An increasing number of Americans make their living through alternative work arrangements, like gig work or self-employment,” Warner said. “Too many of these otherwise creditworthy individuals are being shut out of the mortgage market because they don’t have the same documentation of their income – paystubs or a W-2 – as someone who works 9 to 5. This bill will allow these workers to supply other forms of paperwork to verify their income while continuing to protect consumers from predatory lending.”

 

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