Is this MLO crazy?

[Aaron Junck]

I was at a local REIA a couple nights ago and one of the people that attends regularly is a MLO here in town . Dodd Frank got brought up by him, even though he called it Frank Dodd, :/ and he said that when trying to get approved for another property you will have to be able to afford both on your income. I mentioned that rental income is able to be figured as long as you can show you have 2 years rental income on tax returns, correct. He said no you have to qualify for all mortgages yourself... Did something just change or is this guy off his rocker like I feel he is??

[Bill Gulley]

The MLO was right and probably didn't understand or was fully aware. That's not an issue anywhere in Dodd-Frank. By saying you must qualify for both loans, he might have well had said you have to qualify with all loans you have including the new loan applied for. What he didn't say was that what is customary and accepted is counting 70/75% of the rental income on the subject property if you have experience in rentals. If there is no experience, prudent underwriting would exclude rental income or it could be significantly reduced considering an applicants abilities. These are areas of compensating factors. Sounds like that MLO is a black and white type, either doesn't want to go into the gray areas, or can't go there.

An example, if a math teacher applies for a loan and has no rental experience, rents may not be counted. If an attorney applies for the same deal, rents might be as the legal background is superior in most cases than 2 years rental experience. My last rental loan was acquired with rents (didn't need to be but they did) and I hadn't had any rental activity for a few years, certainly not the last two, the deal was considered on my overall background, it's an assessment of management abilities, it's not a hard and fast requirement.

As to Frank Dodd, well, you may not want to follow that guy too closely. You might try to be tactful and educate him too. I know two ladies here that have the RMLO license and they are so green if it's not all in a well defined box steps 1-42, they can't make a decision. Everyone has to start out sometime. :)