Self-employed borrowers are being squeezed by the recoil from the “easy money” guidelines for home mortgages. Business owners have been taught to take advantage of every possible way to lower their income tax liability by mixing personal expenses with business write-offs. Many small or medium sized businesses have been able to thrive and survive tough times by using these methods of cash management.
Legislators and lenders have reacted to the problems created by lax guidelines (and greed) by requiring borrowers to verify all qualifying income on personal tax returns. This has cut self-employed borrowers with excellent credit scores and no late payment history out of the mortgage market completely. Savings from a one percent decrease in an owner’s mortgage payment might be what it takes to keep a business going through this slow economic time.
HUD, Fannie Mae and Freddie Mac need to examine this problem and find a way to include this large portion of homeowners in the low interest mortgage market or stand up and announce that the tax code and business practices in this country must change. The political fallout would spark a much needed debate about credit and business practices in this country.
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