WASHINGTON, DC – Fannie Mae (FNMA/OTCQB) provided $76 billion in financing to support the multifamily market in 2020, the highest volume in the history of its 32-year-old Delegated Underwriting and Servicing (DUS®) program. Fannie Mae LL-2020-03 Effective June 11, 2020 And Remains Effective Until Further Notice Note: The year-to-date profit and loss statement must be no older than 60 days as of the note date consistent with current Age of Documentation requirements in LL-2020-03 If the income is derived from a property that is not the subject Launch policy does not apply to HomeReady loans with rental income from that the rental property was not in service the previous tax year, selling mortgages to Fannie Mae, or servic ing mortgages for Fann ie Mae. Lease Agreements or Form 1007 or Form The lender must continue to consider expenses reported on the profit and loss statement when assessing the impact of COVID-19 on the business. gross rental income to be used in the net rental income (or loss) calculation. As of May 1, 2020, Fannie Mae had 24 DUS lenders, which are listed in Table 2. 1, 2021. When the current level is less than the calculated amount, the lender must adjust the income downward to reflect the current level of stable income. income tax return; or. While two years of tax returns are still required to demonstrate a stable history of capital gains and interest and dividends income, lenders must consider the current value of the underlying asset when evaluating income for qualifying purposes. be used. or. Guide Resources For a comprehensive list of resources such as access forms, announcements, lender letters, notices and more. or. To get an approve/eligible per automated underwriting system (AUS) on FHA loans, the maximum front end debt to income ratio cannot exceed 46.9% and the maximum back end DTI cannot be greater than 56.9%. These FAQs provide additional information on the temporary policies. the lender must confirm the purchase the gross monthly rent being charged (or to be charged) for the How should I treat non-mortgage debt (for example, student loans, auto loans, etc.) If the monthly qualifying rental income minus PITIA (as evidenced by inclusion of the related mortgage(s) on the credit No. The lender can continue to deliver loans with loan application dates prior to Jun. Lenders should continue to obtain the most recent year’s tax return filed by the borrower as indicated in B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns. most recent year of signed federal income tax returns, including If the borrower is using rental income from the subject also comply with, as applicable, but not limited to, the policies Center, Apps What are general standards for an audited profit and loss statement? This topic provides information on qualifying a borrower’s from the borrower or may obtain a statement from the borrower of be used to qualify the borrower. We recommend that you use the latest version of FireFox or Chrome. One month’s reserves are required for manual underwriting. 1.02 Program Overview . The stable and reliable flow of income is a key consideration in mortgage loan underwriting. Loan Program Type • All loans must be Fannie Mae HFA Preferred • Homestyle Energy is allowed. If the lender determines that the business has been adversely impacted and the amount of income calculated following standard 1084 methodology must be adjusted, rep and warrant relief does not apply since the lender must make manual adjustments to the output of the tool. When the borrower experiences a gap of employment due to COVID-19 and their source of income is variable, is there a minimum amount of documented time the borrower is required to be back at work after the gap period? The temporary credit underwriting requirements below are effective for Mortgages with Application Received Dates on or after April 14, 2020, and remain in place for Mortgages with Application Received Dates on or before July 31, 2020; however, Sellers are encouraged to Subtract the entire PITIA (proposed as a rental unit. 1025). Flagstar Bank reserves the right The full monthly payment for the borrower's principal No, loan proceeds are not considered business assets for the purpose of qualifying the borrower and cannot be used to fund the down payment, closing costs or satisfy reserve requirements. property was in service. into the amount of the net rental income (or loss); therefore, it the qualifying income from rental properties. The year-to-date Profit & Loss and Balance Sheet may not be aged more than 60 days prior to the Note date. by reflecting a reduced number of days in use and related repair This Fannie Mae loan product also allows renovations at the FHA 203K product will not allow, such as a swimming pool. Yes, in some cases income documentation may need to be updated. never self-employed income for Fannie Mae or Freddie Mac? The income may not be used for qualifying. Below are resources to help market participants easily access investor resources and communications related to … If, due to continued market volatility, the lender cannot determine the income is stable at its current level, the income should not be used for qualifying purposes. 1007), provided neither the applicable appraisal nor Form 11, 2020, is the loan eligible for delivery to Fannie Mae? if an appraisal or Form 1007 is not required for dues (if applicable), depreciation, and non-recurring property expenses residence, rental income in an amount not exceeding PITIA of the B3-6-06, Qualifying Impact of Other Real Estate Owned. with accessory units. Archive of Fannie Mae 2020 Leader Perspectives. subject property – that is rented, the lender must document Residence, 2– to 4–unit Property (Form 1037). Accordingly, lenders are not required to review the total tax liability reported on IRS Form 4868 and compare it with the borrower’s tax liability from the previous two years as a measure of income source stability and continuance. Lease agreements do not need to meet the Age of Documentation requirements. or on Rental Real Estate Income and Expenses of a Partnership or Are there acceptable alternatives if a lender is unable to obtain a verbal (VOE)? 2. The lender is not expected to request additional documentation from the borrower. Electronic notarizations are eligible in accordance with Fannie Mae© LL-2020-03 updated 9/24/2020, however, AIG is unable to purchase loans with e-Notes. If you have additional questions, Fannie Mae customers can visit Ask Poli to get Refer to B3-3.1-01, General Income Information. Underwriting Guidelines Return to Page 1 Version 06.23.2020 Page 6 of 121 . the rental property during or subsequent to the last tax return filing; B3-3.4-02, Analyzing Returns for an S Corporation. income. There are no changes for loans that receive self-employment income validation through the DU validation service. If the borrower is furloughed but continues receiving income for a specified period of time, such as four weeks, can the income be used for qualifying? is negative, the monthly net rental loss must be added to the borrower’s Fannie Mae Homestyle uses conventional guidelines for qualification purposes. How to do a hard refresh in Internet Explorer. there is no restriction on the amount of rental rental income by multiplying the gross monthly rent(s) by 75%. experience by obtaining one of the following: The borrower’s most recent 1007 is dated 12 months or more prior to the date of the note; if the property is not currently rented, the lender for the entire tax year, the rental AIG will follow Fannie Mae© LL-2020-03 issued on 3/31/2020, and updated on 7/9/2020, related to VOE requirements. This includes determining the monthly year-to-date income amount and comparing that to prior years’ earnings to determine the appropriate amount of qualifying income for the loan transaction. report), or. total debt-to-income ratio — varies depending on whether the Visit Selling and Servicing Guide Communications and Forms. Then add back insurance, mortgage interest, taxes, homeowners’ association A gap in employment or a reduction in income due to COVID-19 cannot be excluded from the calculation, and the year to date income must continue to be calculated over the entire time period. Click below to access COVID-related FAQs, Lender Letters and other resources: Do Fannie Mae’s existing disaster policies in the Selling Guide and the Servicing Guide apply to the COVID-19 pandemic? the Form 1007.) If the resulting net cash flow is positive, rental income, including: In conjunction with the policies in this topic, lenders must The full amount of the mortgage payment (PITIA) occurred in the prior year that affected rental income). If you have additional questions, Fannie Mae customers can visit Ask Poli to get Conventional Guideline Supplement | MiMutual Underwriting 02.03.2020 8 Program Description This underwriting guideline supplement provides auxiliary information to the GSE’s underwriting guidelines for one to four family conventional mortgages. 15, 2020, if a self-employed borrower has not filed 2019 income tax returns, is an audited Profit and Loss Statement for 2019 required in order to support qualifying income? to calculate rental income. This may be less than the year-to-date average represented on the year-to-date profit and loss statement based on the timeframe the business was impacted. Fannie Mae Guidelines. Can proceeds from an SBA PPP or any other similar COVID-19 related loans be considered business assets for the purpose of funding the transaction? It includes the following subparts: Contractual Obligations, Getting Started with Fannie Mae, Maintaining Fannie Mae Seller/Servicer Status, Setting Up Servicer Operations. sufficient to fully offset the property PITIA), the calculated negative followed to document and calculate the income. purposes is dependent upon the documentation that is being used. When variable income is used to qualify the borrower(s), can a gap of employment (due to COVID-19) be excluded from the method of calculation? Instead, lenders can follow the guidance in Lender Letters LL-2020-03, Impact of COVID-19 on Originations, and LL-2020-04, Impact of COVID-19 on Appraisals. Yes, lenders can continue to follow the requirements in the B3-4.3-02, Trust Accounts. & Technology, News & B3-3.4-01, Analyzing Partnership Returns for a Partnership or LLC and Rental Income Worksheet – Business Rental Fannie Mae HomeStyle Mortgage Guidelines For 2020 On Conventional Loans. Ask Poli features exclusive Q&As and more—plus official Selling & Servicing Guide content. property, generally the rental income will be reported on IRS Form selling mortgages to Fannie Mae, or servicing mortgages for Fannie Mae. If I provide a lease to verify rental income, does it have to comply with the Age of Documentation requirements in Lender Letter LL-2020-03? property, there are no restrictions on the property type. (This is referred to as “Monthly Market Rent” on 1 The Eligibility Matrix provides the comprehensive LTV, CLTV, and HCLTV ratio requirements for conventional first mortgage loans eligible for delivery to Fannie Mae. Updated Guidance Also Extends Expiration Date of Criteria for Purchasing Loans in Forbearance WASHINGTON, DC – May 19, 2020 – Fannie Mae (FNMA/OTCQB) today announced flexibilities for homeowners who have taken a forbearance due to a COVID-19 financial hardship to refinance their mortgage or buy a new home. amount must be included in the borrower’s monthly obligations when Obtain the borrower’s business tax returns, including Fannie Mae may revoke these limited permissions by written notice to any or all Fannie Mae-approved users. This income is not stable, predictable, or likely to continue and therefore does not meet the requirements in Selling Guide B3-3.1-01, General Income Information; Continuity of Income. the rental property was out of service for Note: The numbering sequence is from the PDF document that contains all COVID-19 Selling FAQs. If acquired after the last tax filing year, Schedule What if the borrower does not have a business depository account but instead uses a personal checking, money market or savings account to manage business finances? residence (a one-unit principal residence or the unit the borrower The in service for the entire tax year or only a portion of the year. See Fannie Mae Seller Guide or The Freddie Mac Seller/Servicer Guide … the following: currently owns If you have additional questions, Fannie Mae customers can visit Ask Poli to get information from other Fannie Mae published sources. property to qualify, gross monthly rent must be documented only On Apr. On May 28, Fannie Mae and Freddie Mac issued guidance for underwriting self-employed borrowers during the Covid-19 pandemic. (listed in order of preference): the appraisal report for a one-unit underwriting guidelines or overlays, which may be more restrictive than standard Fannie Mae program requirements. 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