Annual Household Income

[Walt_K]

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@Crashem wrote:

Not sure when the 6 month deadline for credit issuers to implement the householdish income thing is.  This is why you are seeing such different things from different companies as some have implemented vs others.  So wait till it is fully implemented to see how these companies inact it.  I didn't read the actual ruling but here is article:

http://www.consumerfinance.gov/newsroom/the-cfpb-amends-card-act-rule-to-make-it-easier-for-stay-at-...

Again the stay at home spouses/etc. are mentioned.  However maybe rule allows banks to go further, but banks must allow stay at home.  If that is the case, then we will see signficantly different allowed income from different lenders.  Of course this is all signficiantly more complicated than before the government got involved (no surprise here).

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I don't think that is correct.  Banks are not required to consider household income for stay at home spouses.  They are permitted to consider income that the person has reasonable access to.  The prior regulation prohibited them from considering it. This lifts that restriction but banks are permitted to keep considering individual income if they choose.

ETA: IIRC, the prior rule actually did not prohibit banks from considering household income. It required them to make an assessment of a borrower's ability to repay.  If they asked for  household income, they could not rely solely on household income; they would then have to consider additional factors such as assets to satisfy their obligation to make an assessment of ability to repay.  If they asked for income, then they did not have to inquire further and could rely solely on the income provided.  The net effect of adding the additional regulatory burdens if they asked for household income was that nearly all banks ceased asking for household income.  

Now they are changing the regulation to permit them to rely on income such as household income that the person has reasonable access to.  But that doesn't mean that they have to consider it, just that they are allowed to.

[09Lexie]

As you know this regulation was to 'fix' the exclusion of stay-at-home spouses. IMO, the previously excluded partner has reasonable access to the 'income earning' partner's assets through joint access to banking accounts, filing joint taxes etc I.e, I don't think it was intended so that roommates can pool their finances and all of a sudden one applicant can include roommates A&B's income because they share the rent.

If I were a lender and if I asked for POI it would either be in the form of tax returns or bank statements.

Edit: meant to say 'stay-at-home' partners as well.

[W0MACK]

Lexie your right, that roomate scenario sounds like a disaster but I'm sure somewhere someone has done exactly that!

[cashnocredit]

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@W0MACK wrote:

Lexie your right, that roomate scenario sounds like a disaster but I'm sure somewhere someone has done exactly that!

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The flexibility allowed by the Final Ruling is astonishing and sometimes counterintuitive. For instance the anticipated proceeds of a student loan in excess of that paid to the educational institution is allowed to be counted as income. (see page 26)

[sccredit]

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@cashnocredit wrote:

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@W0MACK wrote:

Lexie your right, that roomate scenario sounds like a disaster but I'm sure somewhere someone has done exactly that!

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The flexibility allowed by the Final Ruling is astonishing and sometimes counterintuitive. For instance the anticipated proceeds of a student loan in excess of that paid to the educational institution is allowed to be counted as income. (see page 26)

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It used to be that any financial aid (including the student loan as a whole) could be considered income.  

[cashnocredit]

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@sccredit wrote:

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@cashnocredit wrote:

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@W0MACK wrote:

Lexie your right, that roomate scenario sounds like a disaster but I'm sure somewhere someone has done exactly that!

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The flexibility allowed by the Final Ruling is astonishing and sometimes counterintuitive. For instance the anticipated proceeds of a student loan in excess of that paid to the educational institution is allowed to be counted as income. (see page 26)

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It used to be that any financial aid (including the student loan as a whole) could be considered income.  

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I know this has long been considered income for determining whether someone is a "dependant" for IRS purposes. Still, the IRS doesn't consider it income for tax purposes. I'm surprised that student loans would have ever been considered income for the purpose of taking out more loans. Similar reasoning could apply to virtually any loan procedes.

[enharu]

I agree with what lexie said. The law is "fixed" to help address the issue of stay at home spouses with direct access and expectation to spouse's income.

However, there are obviously people who will commit fraud on the apps by including or fudging income, such as a high school dropout / college kid including parents', siblings' and/or roommates' income. That being said, those people are going to do it anyhow regardless of whatever the law is anyways, so they are simply finding excuses to justify their fraud, and more importantly, they are just a minority.

The best way to do this is to read what the app specifically asks for. If its personal income, include only your own income. If its household income, then include what your spouse makes or whatever money you have access to. If unsure, call the bank and do the app over the phone.

[cashnocredit]

The CFPB Final Ruling specifically allows a lender to request just "income" and an applicant over 21 may, ir response, include both individual income and income they anticpate having access to.

[FinStar]

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@enharu wrote:
I agree with what lexie said. The law is "fixed" to help address the issue of stay at home spouses with direct access and expectation to spouse's income.

However, there are obviously people who will commit fraud on the apps by including or fudging income, such as a high school dropout / college kid including parents', siblings' and/or roommates' income. That being said, those people are going to do it anyhow regardless of whatever the law is anyways, so they are simply finding excuses to justify their fraud, and more importantly, they are just a minority.

The best way to do this is to read what the app specifically asks for. If its personal income, include only your own income. If its household income, then include what your spouse makes or whatever money you have access to. If unsure, call the bank and do the app over the phone.

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+1

This exactly.

[cashnocredit]

I was reviewing Citi's apps and they segregate the income question into 2 segments: Wages and Other Income.  By clicking on the "?" each allows both boxes to include the associated income from others providing one has a reasonable expectation of access and one is over 21.  It looks very much inline with the CFPB final ruling.

Note that the "other income" does not have an exhaustive list of what qualifies but only examples of some items that one may include.