Sens. Mark R. Warner (D-VA) and Mike Rounds (R-SD) introduced Tuesday a measure designed to give self-employed workers with non-traditional forms of income greater access to mortgages.
The senators said the Self-Employed Mortgage Access Act would help creditworthy borrowers by allowing lenders to verify an applicant’s income using additional forms of documentation other than the W-2.
The bill expands the types of documentation self-employed individuals could submit to demonstrate they are a creditworthy borrower and banks could use to keep a loan in qualifying mortgage status. Those types of documentation including the IRS Form 1040 Schedule C for sole proprietorships, the IRS Form 1040 Schedule F for farming, the IRS Form 1065 Schedule K-1 for partnerships and the IRS Form 1120-S for S Corporations.
“An increasing number of Americans make their living through alternative work arrangements, like gig work or self-employment,” Warner, who serves on Senate Banking Committee with Rounds, said. “Too many of these otherwise creditworthy individuals are being shut out of the mortgage market because they don’t have the same documentation of their income, pay stubs or a W-2, as someone who works 9-to-5. This bill will allow these workers to supply other forms of paperwork to verify their income while continuing to protect consumers from predatory lending.”
Rounds said small businesses in South Dakota are the backbone of the nation’s economy and heartbeat of communities.
“We shouldn’t unfairly punish entrepreneurs, farmers and other small business owners because they don’t earn income on a W-2,” Rounds said. “Our legislation gives financial institutions flexibility in the forms of documentation that can be used when applying for mortgage credit, making it easier for South Dakota families to realize their dreams of homeownership.”