You are wrong.

I am self-employed, have been since 1993. I make more than enough. I'm on my third mortgage (December 2005, 30 years, 6.375%, around 40% equity on the original purchase price, ie, not underwater).

I cannot refinance to a lower rate. Chase (the current mortgage holder), Citi, Wells Fargo & a local Maryland bank all refuse. They want adjusted gross income from 1040 line 30-something. Or W2s. Same story from every one of them.

They do not want bank statements (have banked at Wells Fargo since 1993), they don't care about credit score, that I've carried mortgages for eight years & am spotless doesn't make any difference.

Did I make applications? Applications??? I was told not to apply!!

The NYT story was the first reality-based story on the mortgage market that I had read in many months. All you need do to confirm it is phone your local bank, pretend to be self-employed.

One thing you should bear in mind is this: that housing prices are still falling, and banks do not wish to create more underwater loans. This is especially true in NYC and areas of high priced housing where values have yet to find their true level.

The banks know that appraised values are inflated and so will use ANY excuse to avoid lending on these appraisals. Of course, this is the reverse of their behavior in 2005.
It's not the buyers that the banks distrust it is the values, so this is a more rational action than it at first appears.

Lenders can and have always been able to do a cash flow analysis.

Search: Fannie Mae Form 1084
efanniemae.com

All too often, borrowers will take their accountants advice and write off everything but the kitchen sink and the numbers simply won't work.

It's a trade off, you can minimize your taxes or you can document more income to qualify for a mortgage.

As for requiring a two year history, it's not an onerous requirement.

Note, in 2004 a Fannie Mae powerpoint presentation on self-employed income analysis indicated that self-employed borrowers had a 25% default rate higher than salaried or commissioned employees.

I, too, was told by at least 3 banks that there was no use in even applying based on my current rate and the rest of my stats. BTW previously those stats earned me dozens of credit card offers, credit score at 800 and my debt-to-equity ratio is near 50% on my mortgage. So to gauge your conclusion by the number of applications doesn't tell the story.

That was truly touching. I have my checkbook out, pen in hand. Does the Times have a fund for Doctors in Need?

Could Dave's problem be that he makes "enough" but doesn't report all of it on his tax return?

My own situation is similar to some of the commentors, in having good credit, current on payments, more than 50% equity available in my house, but insecure self-employed income. Based on a few phone calls to my bank, I'm discouraged to even apply to refinance now.

Dean, isn't the Mortgage Bankers Association applications index deceptive in that it may not consider the number of those who have given up on applying, the way the usual unemployment index doesn't account for those who have stopped looking for jobs?

This situation is common to all young doctors, isn't it? I rented a home to two young married docs who had just finished their residencies. They went overnight from a combined $52,000 to $600,000 when they accepted their new offers.

New docs already have a lot of debt in the form of med school loans.

I didn't notice anywhere the value of the loan the doc requested.

Let's hope that mortgage lenders are being more rigorous than they were a couple of years ago, and recessions change their view of credit risk. But potential home buyers are probably also reluctant to take on major new debt. The home market is just depressed, as it must be after the bubble.

I can well understand banks being skeptical when dealing with self-employed borrowers, as there was a lot of, how can I put this, income enhancement, during the bubble days. W2 income is documented by a third party and so is more difficult to enhance than self-employment income.

So why does not she simply rent for two years until she has documented income on her IRS statement? I for one would not think any less of her for being a renter or is it a God given right to own a house in this country? BTW you never really own a house even when the deed is in your hands

This is one result of the collapse of the MBS market. Before a bank like Countrywide would issue a mortgage, collect the fees, package them with other mortgages, and sell MBS to Bear Stearns, which would then create a collateralized debt obligation (CDO) and some pension fund in Norway looking to juice yield would buy it. And if Goldman Sachs was involved, they would go to AIG and buy insurance, or CDS, on the CDO, since for AIG this was money for nothing as these things would never default since U.S. housing prices only go up! Well, now the surviving banks can't pass that mortgage on to anyone else and or painfully aware that mortgages do default and U.S. housing prices can go down.

A suggestion for the self-employed: rent (I wish I had) and place your savings in TIPS bonds. Housing prices are going to lower 2011 then they are now.

What disturbs me is the way this reporter was so spun by the usual suspects who want a second real estate bubble (NAR).

While I agree that the NYT article is extrapolating from apparently thin anecdotes, it is certainly not true that the MBA data are "very good data indicating that the vast majority of mortgage applicants face no serious problems getting loans."

As Kettering suggests, the MBA applications index only measures full applications; and many inquiries are discouraged through simple prescreening, especially in the home purchase market by realtors.

Second, applications may be low because underling demand for home purchase loans is low - which it is. This does not say anything about difficulty or ease of qualifying.

Even with better data on home loan applications (HMDA - which lag a year or more), it is quite hard to detect the difficulty of getting a loan without highly detailed, usually expensive and proprietary data. Or from very detailed surveys which lag years.

The anecdotal evidence is certainly that conventional - not FHA or VA - lenders have restricted their lending a good deal, incresing credit score requirements and down payment requirements. The GSEs and mortgage insurance cos have certainly tightened standars. As a result, the FHA is comprising 25% or more of the home purchase market.

None of this is to say that these moves have gone too far or that credit is "too hard" to get. That is a complex and subjective question. And certainly not one easily assessed with readily available data.

My wife and I just bought a house, and I have both W-2 income and 1099 income. The bank was not interested in the 1099 income, even though it was a a substantial portion of my total. Fortunately, the W-2 portion of my income was sufficient. Also, it was a conventional conforming loan, with 20% down, which did make it very easy for them. But the definitely DID want to see statements, returns, credit reports, and all the rest. But loans are being funded and houses are being sold. It's just not as easy as it was in recent years. So what? Why should it be? That's what got us into trouble.

The mortgage application ratio is only part of the story, since it does not capture discouraged applicants. When the bank turns down an application, it usually gives a reason, and often that reason is correctable, but most recent rejections offer no such possibilities. The banks have been burned once, now they are shy.

Luckily, there's lots of money around looking for something better than the 1% or 2% you get at a bank, so I've been doing some secured loans to local businesses who can't get bank credit.

Some small businesses are dealing with the credit collapse by innovating, for example, selling future goods at a discount or selling fractional shares with dividends payable in goods, rather than cash.

It's hard to feel sorry for people like Dave from Maryland. On the one hand, the tax returns they file show low income. On the other hand, they wave about their brokerage and bank statements showing high asset. In the old days, we used to see them coming in for the no doc loans. You can't have it both ways, cheating on your taxes and expecting mortgage companies to factor that in.

Of course in recent years, you could have it both ways bc loan agents were ready to do "no doc" or simply copy and use wipe-out to adjust whatever numbers.

Mortgage brokers were eager to forward to lenders, who eager to fund and package them into MBS.

As other smart commentators have pointed out we expect to see the liber underwriting in the past are gone and back to normalcy where DIT should be max out at 31%.

Dave from Maryland is so naive...it's borrower's CF that service the debt, not your brokerage statements which could have illiquid assets with great pricing volatility.

People applying jumbo loans are expected to show more proof.

She's a dentist, not a MD. In my experience & what I've seen (married to an MD and have many MD friends) banks will make exceptions, and many have MD specific programs.