Please visit Multifamily | COVID-19 for the latest guidance and policy information related to COVID-19. Does the lender need to consider a Paycheck Protection Program (PPP) loan in the borrower’s DTI? 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. 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? We’re concerned for the health and well-being of our employees, customers, and communities, and we urge everyone to take precautions to protect themselves. 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 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). Lender Letter LL-2020-03 – Impact Covid-19 Originations December 10, 2020 This Lender Letter provides reminders and temporary flexibilities to support mortgage originations. Regardless of whether the forbearance or deferment is related to COVID-19, lenders must consider the monthly debt payment in the borrower’s DTI. If Net Rental Income is not entered in VI R, DU will calculate it using the following formula: Gross rental income — 75% = net rental income Lenders must continue to analyze the impact of the pandemic on the business income used in qualifying as outlined in LL 2020-03. If a VOE indicates the borrower is actively employed, but borrower discloses they are furloughed, what are the next steps? The flexibilities were set to expire on July 31, 2020. The DeSoto Residential Assistance Program will provide financial assistance with rent/mortgage, qualifying utility … Fannie Mae's Disaster Response Network has published a guide for renters affected by the coronavirus (COVID-19). A circle with a colored border representing one's progress through a lesson. Income types such as hourly, commission and overtime, are variable by nature. If you are a homeowner, have your financial information handy and contact your mortgage servicer (the company listed on your monthly statement) to request help if you’re concerned about your mortgage payments. 14, 2020 we announced that we will extend our implementation timeline for the redesigned URLA and automated underwriting systems (AUSs) to support the industry during the COVID-19 pandemic. Freddie Mac is open for business and continuing to play our crucial role in the U.S. housing markets. A circle with a colored border representing one's progress through a lesson. If the current value of the asset indicates a reduced amount when compared to historical levels, the lender must use the lower amount provided it is deemed stable at the current level. 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). If the lender determines that the business has not been adversely impacted and the amount of income calculated following standard 1084 methodology is accurate and meets the requirements outlined in Selling Guide. You can also download the printable 1,200+ page PDF, which include links. Selling Guide. Yes. What if an hourly borrower is working less hours now than they worked earlier in the year prior to the COVID-19 impact? 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. Fannie Mae's Disaster Response Network has published a guide for renters affected by the coronavirus (COVID-19). 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? Is it acceptable to exclude the payroll and other expenses (e.g., utilities, business rent) covered by PPP loan proceeds when assessing current business cash flow? information from other Fannie Mae published sources. The National Low Income Housing Coalition is tracking which properties are covered by the CARES Act moratorium. 11, 2020. 11, 2020, is the loan eligible for delivery to Fannie Mae? Lender Letter 2020-03 requires certain additional self-employment income documentation for all loan applications taken on or after Jun. Lenders can continue to waive business income tax returns when the requirements of the Selling Guide are met. 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? Additional documentation may include, but is not limited to, a year-to-date balance sheet, month-to-month or quarterly trending analysis, and/or additional depository account statements. Keeping our Capital Markets desks open and trading mortgage-backed securities (MBS). We will continue to take immediate action based on our business continuity plans and guidance and risk assessments from the CDC and local health agencies. For single-closing construction-to-permanent mortgages with loan applications dated during the timeframe covered in LL-2020-03, unless the loan meets the requirements for the extended 18 month timeframe permitted in the Selling Guide, the 60-day age of income and asset document requirements stated in the Lender Letter apply at both the time of the original closing date of the construction loan and the time of conversion to permanent financing. Yes, however, lenders should apply additional due diligence to capital gains and interest and dividend income since it is calculated using a historical view which may not be sustainable given current market volatility. The existence of a PPP loan could be helpful information in analyzing the borrower's business. Together, our shared commitment increases the level of quality and risk oversight delivering certainty to lenders and Fannie Mae. version of a page. For mortgage loans that are manually underwritten, lenders must follow Selling Guide B3-5.3-02, Payment History; however, lenders are not required to, and should not, consider payments missed during the time of a COVID-19-related forbearance to be historical delinquencies or derogatory credit. When we refer to business depository accounts, we are referring to asset accounts the business uses to deposit business revenue and pay business expenses. Current Selling Guide policy requires these income types to be calculated considering the borrower’s history of receipt, the frequency of payment, and the trending of the amount of income being received. Can the income be used to qualify? Events, Temporary Purchase & Refinance Eligibility, A2-3.2-02, Enforcement Relief for Breaches of Certain Representations and Warranties Related to Underwriting and Eligibility, B3-3.2-01, Underwriting Factors and Documentation for a Self-Employed Borrower, B5-7-03, High LTV Refinance Alternative Qualification Path, A2-2-04, Limited Waiver and Enforcement Relief of Representations and Warranties for Mortgages Submitted to DU, B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns, How to do a hard refresh in Internet Explorer. We recommend that you use the latest version of FireFox or Chrome. And, if Fannie Mae owns your mortgage loan, our Disaster Response Network™ (DRN) can help you navigate the mortgage relief process and address other financial challenges. 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? 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? No, Fannie Mae’s existing policies related to disasters do not apply to loans impacted by COVID-19. We’re here to help. never self-employed income for Fannie Mae or Freddie Mac? Certain types of temporary leave may be eligible for qualifying. The PPP is a loan issued by Small Business Administration lenders under the CARES Act. Rental Income Matrix Rental income may be used in qualifying the borrower(s) provided the requirements of Guide Section 5306.1 and the documentation requirements contained in Guide Sections 5102.3 and 5102.4 and Chapter 5302 are met. COVID-19 UPDATE: Find out how Fannie Mae is responding. Lenders must obtain the additional documentation, such as an audited profit and loss statement, or an unaudited profit and loss statement and three months’ business depository account statements and assess the impact to the business and adjust income accordingly. How should I treat non-mortgage debt (for example, student loans, auto loans, etc.) For full details on these temporary flexibilities, read Lender Letter (LL-2020-03) – Impact of COVID-19 on Originations and Lender Letter (LL-2020-04) – Impact of COVID-19 on Appraisals. What options are available if the business depository account statements for the most recent three months do not support the details in the year-to-date profit and loss statement due to the cyclical nature of the business income? 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. In addition, lenders must apply the age of document and other requirements and guidance in LL-2020-03 for any market-based assets in the trust account required for the transaction. The loan file must include other supplemental documentation, such as business contracts or additional depository account statements, to support the continuing nature of the amount of self-employment income used to qualify the borrower. Can the lender use the year-to-date profit and loss statement to calculate qualifying income? Do Fannie Mae’s existing disaster policies in the Selling Guide apply to the COVID- 19 pandemic? 11, 2020) that required the review to “support and/or not conflict” with the information presented in the current YTD profit and loss statement. Does the tax deadline extension issued as a result of the COVID-19 emergency affect documentation requirements? The lender is not expected to request additional documentation from the borrower. COVID-19 (Coronavirus) has affected millions of Americans, through the loss of a job or income, or illness. Three vertical lines aligned to the left. A verification of the income directly from the employer or the Work Number database. 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. Continuing to fulfill our mission is our priority. Instead, lenders can follow the guidance in Lender Letter s . For example, rental income from a commercial property owned by the borrower is acceptable if the income otherwise meets all other requirements. Mortgage & Rental Payment Histories-All Transactions (effective 4/29/2020-updated 7/28/2020) AIG is providing overlays to Fannie Mae’s temporary Purchase and Refinance eligibility requirements, announced in LL- 2020-03 and updated 7/9/2020; Please refer to Fannie Mae Multifamily Lender Letter 20-05 for guidance as of April 6, 2020. – The Federal Housing Finance Agency (FHFA) announced today that Fannie Mae and Freddie Mac (the Enterprises) will extend several loan origination flexibilities until November 30, 2020. However, lenders are not required to obtain a copy of the IRS Form 4868 (Application for Automatic Extension of Time to File U.S. Yes, in some cases income documentation may need to be updated. Homeowners and renters who have been financially impacted by COVID-19 or natural disaster can also download our app to find relief options and resources on the go. Given that many student loans were placed into an automatic forbearance status and the other party may have missed payments due to the forbearance, we will allow exclusion of the monthly student loan payment if: The borrower is self-employed and owns a business that is closed due to the pandemic. the missed payments are resolved by the responsible party (not the borrower) prior to closing of the new mortgage loan; the responsible party had been making payments on the student loan for at least nine months prior to the automatic forbearance; the lender provides borrower documentation evidencing the student loan is in a COVID-related automatic forbearance, and any missed payments have been paid; and. The lender must use the profit and loss statement (and other supplemental documentation) to determine the current level of stable income. In some cases, this may be the borrower’s personal depository accounts used for business purposes. As a DUS lender, you can grant forbearance to a customer with the delegation Fannie Mae … Hourly workers are covered under our variable income policy. The City of DeSoto is currently offering two grant programs to provide financial assistance to eligible DeSoto residents and businesses affected by COVID-19. Visit KnowYourOptions.com to learn about our available mortgage assistance and relief options. We are actively monitoring the current situation and taking every step to help ensure a safe and sound housing market. What should the lender do when informed of a change in the borrower’s pay structure? Remaining focused on our mission to provide liquidity to the market. See Lender Letter LL-2020-03. Refer to B3-3.1-01, General Income Information. If the trend is declining, the income may not be stable. Yes, lenders can continue to follow the requirements in the B3-4.3-02, Trust Accounts. Published December 16, 2020. Many renters are affected by the devastating impact of the coronavirus, or COVID-19. Fannie Mae, along with our lending and servicing partners, is committed to ensuring assistance is available to homeowners in need. 11, 2020, without the additional level of documentation provided the lender determines the income amount used for qualifying purposes is stable and likely to continue by performing a self-employment income analysis in compliance with Selling Guide requirements. If the lender did not obtain any type of additional self-employment income documentation on loan applications taken before Jun. COVID-19 FAQs Selling - Underwriting & General Last Updated Dec. 16, 2020 . Fannie Mae partners with lenders to decrease risk. 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? COVID-19 (Coronavirus) has affected millions of Americans, through the loss of a job or income, or illness. If the Renters Resource Finder confirms that Fannie Mae financed the apartment complex where you live, you may also be eligible for COVID-19-related tenant protections. The temporary requirements apply to mortgages described in B5-7-03, High LTV Refinance Alternative Qualification Path. The flexibilities were set to expire on October 31, 2020. A hard refresh will clear the browsers cache for a specific page and force the most recent A verification of the income directly from the employer or the Work Number database. The extension provides lenders and other stakeholders additional time to prepare and implement the redesigned URLA (Fannie Mae Form 1003). The program response to COVID-19 includes funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act (S.3548 – 116th Congress (2019-2020)) and reprogrammed TDHCA funds. Fannie Mae’s renter hotline number is 1-877-542-9723 and Freddie Mac’s renter hotline number is 1-800-404-3097. Yes, reference the guidelines and flexibilities announced in LL-2020-03. If the trend in the amount of income is stable or increasing, the income amount should be averaged. If a borrower has a history of renting the subject or another property, generally the rental income will be reported on IRS Form 1040, Schedule E of the borrower’s personal tax returns or on Rental Real Estate Income and Expenses of a Partnership or an S Corporation form (IRS Form 8825) of a business tax return. An SBA PPP or any other similar COVID-19 related loan or grant is not considered a source of business revenue. Browse our online resources, learn at your own pace, and discover Fannie Mae learning tools. As a DUS lender, you can grant forbearance to a customer with the delegation Fannie Mae provided you. Selling, Securitizing, and Delivering Loans, Research Do the temporary requirements for self-employed income announced in Lender Letter 2020-03 apply to the High Loan-to-Value Refinance Option? Our teams are fully operational and ready to execute your multifamily business. No. This program is available for households within the 50-80% range of Area Median Income (AMI). Center, Apps information from other Fannie Mae published sources. Rental Income Calculation Worksheets. The lender must continue to use the required level of tax return documentation to calculate self-employment income. 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. Their call center is open 24/7. The changes are to ensure continued support for borrowers during the COVID-19 national emergency. 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