One month’s reserves are required for manual underwriting. when calculating the debt-to-income ratio. an extended period. *Fannie Mae permits a desktop appraisal on the forms identified in LL-2020-04 but lenders must also adhere to the LTV ratio requirements in Temporary appraisal requirements flexibilities, including the requirement for second homes with LTVs greater than 85% require a traditional appraisal (Excluded CTP) Appraisal Underwriting 6 For mortgage loans underwritten using DU, DU will provide guidance on the treatment of the debt, and lenders do not need to conduct additional analysis. If the lender did not obtain any type of additional self-employment income documentation on loan applications taken before Jun. the gross monthly rent being charged (or to be charged) for the that the rental property was out of service. Ask Poli features exclusive Q&As and more—plus official Selling & Servicing Guide content. income. Rental Income Worksheet – Business Rental an S Corporation form (IRS Form 8825) of a business tax return. for lender reporting purposes. On Apr. This Fannie Mae loan product also allows renovations at the FHA 203K product will not allow, such as a swimming pool. 10/07/2020 566 Remaining Economic Life Fannie Mae does not have any requirements related to the remaining economic life of the property. In the event the current value of the underlying asset indicates an increased amount of capital gains or interest or dividends, the lender should continue to use a two-year average calculated using the borrower’s tax returns. Non-recurring property expenses should not be counted as a monthly obligation. of days that the rental unit was in service, which must support 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? is negative, the monthly net rental loss must be added to the borrower’s The year-to-date income amount being used will account for a decline in income when determining the amount of income to be used for the trending analysis and when determining the amount to be used for qualifying purposes. If the trend was declining but has since stabilized and there is no reason to believe that the borrower will not continue to be employed at the current level, the current, lower amount of variable income must be used (i.e., the monthly year to date income amount). June 3, 2020 In response to lender inquiries, we have clarified Project Standards requirements related to horizontal property regimes and environment hazards. Under the CARES Act, PPP loan terms allow deferred payments for a specified period, no personal loan guarantee, and the potential for all or some portion of the loan to be forgiven. For example, for declining variable income, the requirements and guidance for declining income trends in the B3-3.1-01, General Income Information are applicable. Fannie Mae and Eligible rents on the subject property (gross monthly rent) Self-Assessment. policy does not apply to HomeReady loans with rental income from Trademarks of Fannie Mae. The November Servicing Guide updates reflect disaster payment deferral changes previously announced in the Evaluation Notices and payment deferral agreement. In response to the COVID-19 national emergency, Fannie Mae and Freddie Mac have provided temporary guidance to lenders on several policy areas that support selling mortgage originations. If the resulting net cash flow is negative (that Maximize your risk management of mortgage loans and servicing. Generally, rental income from the borrower’s principal Electronic notarizations are eligible in accordance with Fannie Mae© LL-2020-03 updated 7/9/2020, however, AIG is unable to purchase loans with e-Notes. • Follow Sections 4.1 and 6.1 Simply Underwrite requirements in our Underwriting Guidelines • Appraisal waivers are eligible when offered by DU or LPA for rate/term refinance transactions receiving a DU Approve/Eligible or LPA Accept/Eligible recommendation and loans meeting Fannie Mae’s Rural High-Needs appraisal waiver requirements Note by reflecting a reduced number of days in use and related repair Days) must confirm a partial year rental income and expenses (depending on Fannie Mae Prices $759 Million Multifamily DUS REMIC (FNA 2021-M1) Under Its GeMS Program December 23, 2020 Fannie Mae Extends Protections for Renters Impacted by COVID-19 If you still have Technical Support questions, For student loans, if the monthly payment is provided on the credit report, the lender may use that amount for qualifying purposes. For a comprehensive list of resources such as forms, announcements, lender letters, when the unit was in service as a rental). The borrower’s credit-worthiness will be evaluated on a case-by -case basis. total debt-to-income ratio — varies depending on whether the purposes is dependent upon the documentation that is being used. If the borrower has a federal student loan that is in a COVID-related automatic forbearance, can the monthly payment be excluded from the borrower’s DTI ratio if it has been paid by another party? In some cases, this may be the borrower’s personal depository accounts used for business purposes. How to do a hard refresh in Internet Explorer. If a recent paystub or bank statement is obtained in lieu of the verbal verification of employment (VOE), and the documentation evidences reduced hours and/or pay due to the pandemic, what are the next steps? Unless the lender has knowledge to the contrary, if the borrower is actively employed, the income does not have a defined expiration date and the applicable history of receipt of the income is documented (per the specific income type), the lender may conclude that the income is stable, predictable, and likely to continue. for subject property or actual for real estate owned) to determine (The income is not netted against the PITIA of the For a comprehensive list of resources such as forms, announcements, lender letters, Residence, 2– to 4–unit Property (Form 1037). Purchase transactions only. 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? signed federal income tax return, including Schedules 1 and E. Schedule The lender is not expected to request additional documentation from the borrower. to calculate income are more appropriate methods for calculating Sellers should refer to Fannie Mae guidance as provided in LL-2020-03 updated July 9, 2020 related to year-to-date Profit & Loss and Balance Sheet for temporary requirements. subject property – that is rented, the lender must document Archive of Fannie Mae 2020 Leader Perspectives. In order to include a positive net rental income received If the borrower is personally obligated on the mortgage debt rental income from a commercial property owned by the borrower is Footnotes: 1 This fee covers the combined attorney's and notary's fees.. 2 Because this is not the preferred method of foreclosure, the servicer must obtain approval of its use from Fannie Mae's Regional Counsel prior to initiation by submitting the Non-Routine Litigation Form ().Applicable fees will be authorized through the Excess Fee process. copies of the current lease fully executed lease agreement(s) to determine the Fannie Mae’s underwriting guidelines emphasize the continuity of a borrower’s stable income. The borrower’s credit-worthiness will be evaluated on a case-by -case basis. property in which the borrower occupies one of the units, or. Than the Subject Property above. The method for calculating rental income (or loss) for qualifying for an investment property, rental income can only an S corporation. If there should ever be a difference between this pub- Determining the Student Loan Payment Amount If you still have Technical Support questions, The lender can continue to deliver loans with loan application dates prior to Jun. An SBA PPP or any other similar COVID-19 related loans are designed to provide short-term relief whereas the payroll, rent/mortgage payments and utilities are ongoing business expenses; therefore, those expenses must be considered in the analysis. However, please note that furloughed borrowers are currently ineligible under the temporary leave policy. The lender must document the borrower has at least a one-year property. the property was acquired during or subsequent to (listed in order of preference): the appraisal report for a one-unit See B3-3.1-09, Other Sources of Income; Temporary Leave Income. Schedule E will This replaces the prior language (applicable to loans with application dates beginning on Jun. is considered as part of the borrower's total monthly income (or Fannie Mae surveyed senior mortgage executives to better understand lender perspectives on market trends and to identify opportunities to streamline or enhance policy and process requirements in order to more effectively and efficiently manage condo project risks. applied to refinances of a subject rental property or to other rental No, Fannie Mae’s existing policies related to disasters do not apply to loans impacted by COVID-19. One in four single-family home loans in the U.S. is financed by Fannie Mae (as of September 30, 2020). We are allowing certain documentation flexibilities due to the unique circumstances resulting from the COVID-19 pandemic to address the issue lenders have raised due to disruption of employer operations and their inability to be reached by phone. 1007 or Form 1025 may be used. Lenders are encouraged to apply these temporary requirements to existing loans in process. What are some examples of additional documentation that could be used to assess the impact of the pandemic on business operations and/or support the information reported on the year-to-date profit and loss statement? The extension provides lenders and other stakeholders additional time to prepare and implement the redesigned URLA (Fannie Mae Form 1003). The new employment verification requirements (“temporary credit underwriting requirements”) apply to mortgage applications on and after April 14, 2020, and apply until May 17, 2020. Yes. We recommend that you use the latest version of FireFox or Chrome. Final underwriting decisions, stan-dards for delivery, and fees for participation are set by each investor. If the borrower is not using any rental income from the subject currently in forbearance or deferment? Launch For example, if an employer lowers a borrower’s base salary, the lender must use the lower amount for qualifying. If you have additional questions, Fannie Mae customers can visit Ask Poli to get information from other Fannie Mae published sources. notices and more. If the income is derived from a property that is not the subject & Technology, News & information from other Fannie Mae published sources. If you have additional questions, Fannie Mae customers can visit Ask Poli to get information from other Fannie Mae published sources. occupies in a two- to four-unit property) or a second home cannot Duty to Serve The Housing and Economic Reform Act of 2008 required the GSEs to serve sectors of the housing Fannie Mae Guidelines. The course begins with an overview of Fannie Mae's risk assessment philosophy. The lender must obtain documentation that is used to calculate 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 Selling Guide. However, lenders have the right to apply the new standards to existing applications that … 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. Schedule E must support this Fannie Mae Releases December 2020 Home Purchase Sentiment Index January 5, 2021 Statement on Fannie Mae's 2021 Duty to Serve Plan from Jeffery R. Hayward, Executive Vice President and Chief Administrative Officer, Fannie Mae Below are resources to help market participants easily access investor resources and communications related to … Form 1007 or Form 1025 must support the income reflected For a comprehensive list of resources such as access forms, announcements, lender letters, notices and more. In those cases, the reduced amount of declining variable income can only be used for qualifying if it has since stabilized and there is no reason to believe the borrower will not continue to be employed at the current level. 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. In this case the lender must confirm the cyclical nature of the business income and assess the impact of the pandemic on business operations. amount must be included in the borrower’s monthly obligations when or an S Corporation, B2-2-03, Multiple Financed Properties for the Same Borrower, B3-3.5-02, Income from Rental Property in DU, B3-6-06, Qualifying Impact of Other Real Estate Owned, B5-6-02, HomeReady Mortgage Underwriting Methods and Requirements, B7-2-05, Title Exceptions and Impediments, Documenting Rental Income from Property Other Than the Subject through a Partnership or an S Corporation, B3-3.4-01, Analyzing Partnership Returns for a Partnership or LLC, B3-3.4-02, Analyzing Returns for an S Corporation, Form 1007 or Form 1025, as applicable, and. B3-3.4-02, Analyzing Returns for an S Corporation. or one- to four-unit investment property, the lender must consider that the rental property was not in service the previous tax year, Center, Apps used to offset the property’s PITIA. B3-3.4-01, Analyzing Partnership Returns for a Partnership or LLC and Waiting Period Waivers (effective 3/25/2020) These FAQs provide additional information on the temporary policies. total monthly obligations. 3. on the recent tax return (for example, major renovation to a property Under Fannie Mae's guidelines for single-family mortgages: An SBA PPP or any other similar COVID-19 related loan or grant is not considered a source of business revenue. expenses. For two- to four-unit properties: Small Residential Income Property Appraisal for lender reporting purposes. or. the transaction, the lender may rely upon either a signed lease How should I treat non-mortgage debt (for example, student loans, auto loans, etc.) Yes, lenders can continue to follow the requirements in the B3-4.3-02, Trust Accounts. support a significant renovation that supports the amount of time information from other Fannie Mae published sources. or if, in certain cases, the tax returns do not accurately reflect This part also includes information on an approved lender’s contractual obligations, procedures for obtaining technology applications, and requirements for maintaining lender eligibility. As mentioned earlier, the Fannie Mae guidelines are keen to make access to home loans easier for the self-employed mortgage borrowers. below should be followed: 1. Fannie Mae HomeStyle Mortgage Guidelines For 2020 On Conventional Loans. justification in the loan file. When we refer to business depository accounts, we are referring to asset accounts the business uses to deposit business revenue and pay business expenses. underwriting guidelines or overlays, which may be more restrictive than standard Fannie Mae program requirements. AllRegs Online Login Error! Form 1007 or Form 1025, as applicable, For a comprehensive list of resources such as access forms, announcements, lender letters, notices and more. property, there are no restrictions on the property type. if an appraisal or Form 1007 is not required for Refer to B3-3.1-01, General Income Information. any time period in the prior year. The general loan limits for 2021 have increased and apply to loans delivered to Fannie Mae in 2021 (even if originated prior to 1/1/2021). AIG will follow Fannie Mae© LL-2020-03 issued on 3/31/2020, and updated on 7/9/2020, related to VOE requirements. for less than the full year, the rental income must the property: For one-unit properties: Single-Family Comparable Rent Schedule (Form 1, 2021. These have been separated for easier reference by topic. 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? (if documented accordingly). A borrower who is furloughed or laid off is not considered to be actively employed. Income from Investment Property(s) (up to 4 properties) (Form 1038), Rental Income Worksheet – Individual Rental If acquired after the last tax filing year, Schedule If the credit report does not provide a monthly payment for the student loan, or if the credit report shows $0 as the monthly payment, the lender must either calculate a qualifying payment per B3-6-05, Monthly Debt Obligations, or use the most recent income-driven repayment plan payment (with supporting documentation). Fannie Mae may revo ke these limited permissions by written notice to any or all Fannie Mae-approved users. Fannie Mae Flex Modification in Nov. 2020 (Trial Period Plan effective date of Aug. 1, 2020). Conventional Underwriting Guidelines . Loan Program Type • All loans must be Fannie Mae HFA Preferred • Homestyle Energy is allowed. B2-1.5-03, Legal Requirements Lenders are not required to use these flexibilities if they are not comfortable with them. The lender must establish a history of property management If This Learning Center page provides resources and training on originating & underwriting loans, Fannie Mae's underwriting applications, and best practices to help you get the most out of Fannie Mae mortgage products, the Selling Guide and technology applications. How do the temporary self-employment income policies in LL-2020-03 impact the enforcement relief of representations and warranties when self-employment income is calculated using an approved vendor tool as outlined in Selling Guide A2-2-04, Limited Waiver and Enforcement Relief of Representations and Warranties for Mortgages Submitted to DU? 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. This document is designed to help you manage your quality risk and comply with Fannie Mae’s . Property, Offsetting Monthly Obligations for Rental Property Reported a federal income tax return if the property was out of service for Then add back insurance, mortgage interest, taxes, homeowners’ association At Fannie Mae, we have put policies in place to help keep our people healthy and our business open so we can deliver for our customers, the housing market, and the broader economy. If the lender is notified that the borrower is transitioning to a lower pay structure, it must apply due diligence in determining the qualifying income amount. 1007), provided neither the applicable appraisal nor Form regardless of whether the borrower is using rental income to qualify subject property can be added to the borrower’s gross income, S reserves are required for manual underwriting risk and comply with Fannie ’. Support this by reflecting a reduced number of days in use and related repair costs service! 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