New bipartisan legislation in the U.S. Senate is seeking to expand mortgage access to creditworthy borrowers with nontraditional income streams.
The Self-Employed Mortgage Access Act
allows lenders to verify an applicant's income using documentation forms other than a W-2. The legislation, introduced by Sens. Mark Warner (D-VA) and Mike Rounds (R-SD), is designed to enable the self-employed, professional free-lancers and members of the gig economy to be able to take out a home loan. The senators stated that their bill would cover up to 42 million Americans, or 30 percent of the labor force.
"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."
"We shouldn't unfairly punish entrepreneurs, farmers and other small business owners because they don't earn income on a W-2," Rounds said. "Our legislation gives financial institutions flexibility in the forms of documentation that can be used when applying for mortgage credit, making it easier for South Dakota families to realize their dreams of homeownership."
The Mortgage Bankers Association (MBA) voiced its support of the bill.
"This bipartisan, common sense legislation would allow the use of prudent and well-established underwriting standards to responsibly expand access to mortgage credit by providing lenders and investors greater certainty about standards for validating borrower ability to repay," said MBA Senior Vice President of Legislative and Political Affairs Bill Killmer. "We believe consumers who own small businesses or are otherwise self-employed should not face unnecessary obstacles to homeownership. By allowing the use of standards already in place at FHA, VA, USDA, Fannie Mae and Freddie Mac, this legislation better ensures that all consumers are treated on a level playing field when it comes to mortgage underwriting."