They were blamed for the biggest financial disaster in a century. Subprime mortgages – home loans to borrowers with sketchy credit who put little to no skin in the game. After the epic housing crash, they disappeared because of strong new regulation and zero demand from investors who were badly burned. Barely a decade later, they’re coming back with a new name – nonprime — and, so far, some new standards.
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I was looking at the mortgage lenders we get a discount through. Most are 0.125% rate reduction or 0.5% credit. One is advertising jumbo mortgages with 5% down and using RSU income to calculate qualification. I can’t imagine what could possible go wrong with that.
I did a performance review for an employee who’s vesting the last year of their hire on grant. The stock was $346 at the time of the grant, so it’s gone up more than 4x. That’s going to make for a great year.
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I have used WF for mortgages a couple of times and they used RSU income. Way WF did it was to see you have had RSU income for at least 2-3 years and how much your RSU income was for each of those years and they want to see you have grants vesting in the coming years and what was the value of the RSU that you would vest in the coming years. That will probably help avoid some of the hockey stick effect of the policies adopted by Amazon and the like.
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Question is:
What happens if that fictitious $ disappears on a meltdown ala 2008?
To me, they are playing with numbers, not with factual $ on hand.
Yea, I could imagine a new Amazon hire going for a loan and loose lending allows him to count his 1M stock grant of which he gets axed before 3 years or something and only vest 20%…
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It can definitely go bad. That’s why I live on base pay and invest the RSU income.
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And that’s how it should be done.
I think, correct me if wrong, that RSUs then, once they are in that stage, are considered as the famous “stated income”? It is, could be, should be, some day, etc. be this huge numbers…or not!
I consider that this is kind of in the boundaries of dangerous for the economy in general. The stock market crashes, there go the RSUs.
I may be bringing a video where an financial adviser suggests to not always be in the “I am riding the wave” when it comes to investments. Sometimes he said, it is OK to sell, wait, and then buy again or stay put.
Like Bitcoin. I remember some people owning business of any type were accepting Bitcoin at that day’s evaluation. Jesus! They were kind of RSUs, right? 
Unfortunately, people like manch want to get rich fast, he felt he is behind his contemporaries like your sincerely, so he goes all out to take the highest risk allowable to capture the highest reward possible. So long both RE and stock market are trending up, no issue, and in fact, “clever” strategy.
I have RSUs but I’ve never used them to qualify for a mortgage. Should inquire about that next time. But I would imagine that the value of the RSUs is discounted (not $ for $) when used for income calculation purpose, just like rental income is discounted (75%?).
Lender typically qualified a borrower by his income, but this person can still lose his job after obtaining the mortgage, so lender shouldn’t lend at all? It’s all in the probabilities. I don’t see why RSU-as-income-to-qualify-for-loan is a big no-no, but I do agree that it’s one area that can be abused.
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Not sure what you mean exactly. RSUs are not ESPPs or EOs.
Usually vested quarterly over 4 years.
Once vested, tax is due for the vested shares, you can choose how to pay the taxes, most choose to deduct from the equivalent shares amount, apparently wuqijun chooses to use his own money.
That is, vested RSUs are yours 
and won’t go poof unless the company becomes insolvent.
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My last employer had some serious execution issues getting new product to market. That’s death in tech. The stock tanked by 50% which is pretty difficult in a bull market. One of my co-workers got laid off after borrowing from his 401k to buy a house with a FHA mortgage. It was a huge commute. He had to go super far out to have a FHA offer accepted. They obviously didn’t have much savings thus the FHA mortgage. Then they had to payback the 401k loan within 30 days of termination. I’m sure that combination of events financially ruined him and his wife.
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Indeed, that’s the risk we can face nowadays when you see people willing to pay whatever for a home but in fact they don’t have the real money to do so.
I was doing loans back then and I swear the corruption, even from the banks was unbelievable. Stated income, aka liar loans were pushed by the banks big time.
No doubt. That’s definitely a killing field for them.
Dang it man! You are talking to a production planner that showed up to work the very day he was going to be vested on stocks. Only to find out he would be handed a pink slip. 
In 2015 when we shopped for mortgages none of the big banks(chase, citi, us bank etc) counted RSUs towards income even with a consistent history of RSUs.
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I bought my current primary in 2014. Wouldn’t have qualified without using RSU income. The DTI wasn’t pencilling out because I was running paper losses on rentals I had bought earlier (and put in money to fix them up). I was glad to find a lender who would work with me on it. The only other option I had at that time was to go the portfolio loan route which I wasn’t keen on
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Also, subprime has been alive and well via FHA. Tax payers are on the hook if those people default.
No never got the portfolio loan. I was recommended going the porfolio loan route to buy from 2 of the 3 lenders I talked to. The third (in this case WF) said we can use RSU. Went with them. And they had my business for a number of years as the team I worked with was really good (very quick approvals, minimal back and forth), the only other similar team I saw was my commercial lender at US Bank. Last year I switched to BofA (your bank I think) for a loan because their rates on investment 4-plex if you can bring assets to them was better then WF by 37.5 basis points (but man are they slow and bad about paperwork).
edit: 375 to 37.5 (or 0.375% less)
It is kind of refreshing to hear good things from a loan officer.
Thanks!