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Senate bill aims to increase lending to self-employed

Millions of Americans don’t  work traditional 9-to-5 jobs, and two U.S. senators want to make it easier for them to get a standard mortgage.

U.S. Sens. Mark Warner, D-Virginia and Mike Rounds, R-South Dakota, both members of the Senate banking committee, introduced a bill this week that would enable the self-employed and gig workers, among others with non-traditional jobs, to verify their income using forms other than the W-2.

Basically, this would be a way for borrowers to prove they can repay the mortgage to the standard set down by the federal Qualified Mortgage rule. Most lenders aren’t comfortable lending outside of QM, and this could be the way to qualify more people for standard mortgages, and still protect borrowers from predatory lending practices, according to the press release.

“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.”

Warner and Rounds said the added flexibility could potentially help up to 42 million Americans, or 30 percent of the labor force, who work non-standard jobs. Alternative paperwork could include 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.

Representatives from the Mortgage Bankers Association, the Consumer Federation of America; and the Milken Institute indicated they support the bill.  


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