(Reuters) - Most U.S. mortgage lenders are not ready to relax income rules even as more Americans become part of the so-called gig economy, and banks are excluding income from this work on loan applications, a survey released on Wednesday showed.
Lenders worry about the ability of gig economy workers to meet their monthly mortgage payments when their income is less predictable than an employee with a steady, regular paycheck, according to the survey from mortgage finance agency Fannie Mae.
Roughly a fifth of the U.S. population works job to job including employment with gig economy companies like Uber[UBER.UL] and TaskRabbit.
The trend comes as housing supply remains tight and home values and borrowing costs are on the rise.
“Almost all lenders think it is difficult to use gig economy income to approve mortgage applications, citing inconsistencies and variability as risk factors,” Fannie Mae said of its findings. “The few who think using gig economy income is easy note that reliable documentation is crucial.”
Sixty-nine percent of the mortgage executives told Fannie that current underwriting guidelines for self-employment income verification are “about right.” This compared with a third of them who believe they are “too strict.”
The executives surveyed said they were open to options for gig and self-employed borrowers to compensate for the variability of their income, Fannie said.
These options include a demonstrated improvement in credit scores for these types of applicants; lowering of their overall indebtedness and raising their cash on hand.
Lenders said they would consider creating new policies for self-employed individuals and relaxing existing income documentation and verification standards.
Seventy-one percent of the executives said borrowers have applied for a loan using gig income in the past year, Fannie said.
Nearly 90 percent of them expected the number of loan applicants with gig income would grow in the next three to five years.
About two-thirds of executives acknowledged accepting gig income on mortgage applications would at least “somewhat help” low- to moderate-income borrowers.
In a survey in December, Fannie found most gig economy workers who rent believe it would be tough to obtain a mortgage, blaming the ability to raise enough money for a down payment and credit as the steepest hurdles to getting a loan.
Reporting by Richard Leong; Editing by Daniel Bases and Cynthia Osterman