If the business provides acceptable evidence of its payment of the obligation, but the lenders cash flow analysis of the business does not reflect any business expense related to the obligation (such as an interest expenseand taxes and insurance, if applicableequal to or greater than the amount of interest that one would reasonably expect to see given the amount of financing shown on the credit report and the age of the loan). feel free to email. If you have additional questions, Fannie Mae customers can visit Ask Poli to get (For best result, pose your search like a question. fannie/freddie automated underwriting usually throws out any installment debt that 10 or less payments left (except for car leases) regardless of the payment you do not count installment debts if they have less than 10 months remaining. If you still have Technical Support questions, feel free to email. One update makes changes to its earlier guidance on excluding mortgage debts that a borrower is obligated but another party is making the payments from the borrowers DTI ratio calculation. We recommend that you use the latest version of FireFox or Chrome. information from other Fannie Mae published sources. All garnishments with more than ten months remaining must be included in the borrowers recurring monthly debt obligations for qualifying purposes. If you have additional questions, Fannie Mae customers can visit Ask Poli to get Watch Video > admin jkillian@apsec.com 1 (646) 776-7714 for delivery to Fannie Mae. Acceptable evidence includes the most recent payment reminder from the IRS, reflecting the last payment amount and date and the next payment amount owed and due date. Retirement, government annuity, and pension income and employment-related assets as income. and expense amounts that are on the final loan application. Example 1: Your gross monthly income: $6500. October 2022 The monthly summary report contains information about Fannie Mae's monthly and year-to-date activities for our gross mortgage portfolio, mortgage-backed securities and other guarantees, interest rate risk measures, and serious delinquency rates. feel free to email. If you have additional questions, Fannie Mae customers can visit Ask Poli to get The payment deferral home retention workout option enables mortgage servicers to assist eligible homeowners who have resolved a temporary hardship and have resumed their monthly contractual payments but cannot afford either a mortgage reinstatement or repayment plan to bring the mortgage loan current. Freddie Mac (Conventional): You can omit these debts on a case by case approval. Fannie Mae Announces Replacement Rates for Legacy LIBOR Products. Under this rule, as updated, the exclusion of the borrowers full monthly housing expense signified by his/her PITIA (principal, interest, taxes, insurance and other assessments) from his/her recurring debt obligations used to calculate DTI ratio will occur when: The clarifications are effective immediately. See all news. in determining whether the appropriate approach is to include or exclude debt for It is reasonable to assume that the obligation has not been accounted for in the cash flow analysis. Can you switch mortgage lenders before closing? Execution, Learning Refer to Chapter 10 for Federal Income Tax agreement eligibility. How is the monthly payment for a HELOC calculated? This Lender Letter contains the policies previously published in LL-2020-02 on Dec. 9, 2020, with the changes noted below and in the provided Change Control Log. We've been listening to your feedback and are excited to share the newest version of the Single-Family Seller/Servicer Guide. If you have additional questions, Fannie Mae customers can visit Ask Poli to get A borrower's liabilities include the following: housing payment (mortgage or rent) for each borrower's principal residence, all revolving charge accounts, installment loan debts with a remaining payment term greater than 10 months, installment debts secured by virtual currency, lease payments, real estate loans, HELOCs, alimony and child support, feel free to email. Payoffor paydown of debt solely to qualify must be carefully evaluated and considered in the overall loan analysis. The payments on a federal income tax installment agreement can be excluded from the borrowers DTI ratio if the agreement meets the terms in Debts Paid by Others or Installment Debt described above. loan must be re-underwritten with the updated information to determine if the loan For a comprehensive list of resources such as access forms, announcements, lender letters, notices and more. & Insights, Pricing & If a borrower has multiple student loans in deferment or forbearance, should these payments be calculated separately or combined? a lender might calculate a higher minimum payment on a credit card account than what (For best result, pose your search like a question. In order to exclude non-mortgage or mortgage debts from the borrower's DTI ratio, the lender must obtain the most recent 12 months' canceled checks (or bank statements) from the other party making the payments that document a 12-month payment history with no delinquent payments. What happens if I want to sell my home before my mortgage is paid off? Lenders should analyze the risk of including the debt versus not including it and take the other compensating factors into consideration when making the underwriting decision. At least one payment must have been made prior to closing. In all cases, if the lender determines that there is new subordinate financing on accounts do not have to be paid off at or prior to closing if the balance of an individual Note: If the increase in the DTI ratio moves the DTI about federal income tax installment agreements, see Freddie Mac (Conventional): The borrower must be the co-signer and not primary obligor. Interestingly, the higher threshold for DTI ratios is accompanied by other guidelines that can lower them. However, for transactions that do not require the verification of reserves, account is less than $250 or the total balance of all accounts is $1,000 or less. The table below provides references to the Announcements and Release Notes that have Center, Apps Fannie Mae Releases November 2022 Monthly Summary. For details regarding the qualifying impact of other real estate owned, see B3-6-06, Qualifying Impact of Other Real Estate Owned. The lender obtains the following documentation: an approved IRS installment agreement with the terms of repayment, including the monthly payment amount and total amount due; and. Fannie Mae will waive this requirement and not require the debt to be included in the DTI ratio if the following documentation is provided: a fully executed sales contract for the current residence, and. (For best result, pose your search like a question. Note: For loan casefiles underwritten through DU, when using the option of reducing the borrowers monthly qualifying income by the alimony or separate maintenance payment, the lender must enter the amount of the monthly obligation as a negative alimony or separate maintenance income amount. Popular with first-time home buyers, it . verified, disclosed, or identified during the mortgage process. For example, this means a doctor's office would be exempt if it has less than $10 million in revenue, a jeweler would be . How do I treat a monthly obligation on a bridge loan? A borrowers liabilities include the following: housing payment (mortgage or rent) for each borrowers principal residence. Fannie Mae Guidelines for Calculating Student Loan Deferment. Access forms, announcements, lender letters, legal documents, and more to stay current on our selling policies. Effective immediately, PennyMac is aligning with Fannie Mae's updates to the requirements related . However, if the lender chooses to obtain a new credit report after the initial DU Version 10.1 (to be implemented the weekend of July 29 th ) will align with this change. B3-6-04, Qualifying Payment Requirements); monthly payments on installment debts and other mortgage debts that extend beyond Having Issues with Seeing this Page Correctly? Fannie Mae customers! information from other Fannie Mae published sources. a fully amortizing payment using the documented loan repayment terms. Visit Selling and Servicing Guide Communications and Forms. for the mortgage (see Chapter B33, Income Assessment). B3-6-05, Monthly Debt Obligations. Installment loans that are being paid off or paid down to 10 or fewer remaining monthly payments do not need to be included in the borrowers long-term debt. If the DTI does not exceed 45%, but is increasing by 3 version of a page. B3-5.3-09, DU Credit Report Analysis. underwriting decision was made, the loan must be re-underwritten. The Notes, together with interest thereon, are not guaranteed by the United States and do not constitute a debt or obligation of the United government mortgage loans lenders must follow the requirements for the respective payment on the current outstanding balance does not need to be included in the borrower's the lenders cash flow analysis of the business took payment of the obligation into consideration. equitymust be paid off at or prior to closing. Where can I find answers to questions on student loans? in the overall loan analysis. and concurrent with loan closing: Note: The lender is not required to obtain a new credit report to verify the additional What if the credit report does not show a minimum payment for a revolving charge or personal line of credit? For more information, seeB3-6-05, Monthly Debt Obligations. If the account in question has a history of delinquency. If you still have Technical Support questions, obligations; monthly payments on installment debts secured by virtual currency; monthly payments on lease agreements, regardless of the expiration date of the lease; monthly alimony, child support, or maintenance payments that extend beyond ten months Fannie Mae (Conventional): You can omit these debts on a case by case approval. December 22, 2022. Installment debts with Less than 10 Payments Left. a copy of a current, fully executed lease agreement and two months canceled checks (or equivalent payment source) supporting the rental payment amount. Get answers to your Selling Guide & policy questions with Fannie Mae's AI-powered search tool. Are there any technical considerations for a student loan cash-out refinance? For a comprehensive list of resources such as access forms, announcements, lender letters, notices and more. & Insights, Pricing & Speak with one of our expert loan officers today! If a revolving account balance is to be paid off at or prior to closing, a monthly What is required for court-ordered assignment of debt? Note: Payment on any debt secured by virtual currency is an exception to the above policy and must be included when calculating the debt-to-income ratio. We recommend that you use the latest version of FireFox or Chrome. B2-1.3-03, Cash-Out Refinance Transactions); high LTV refinance transactions - except for loans underwritten under the Alternative Manually underwritten loans: If the recalculated DTI does not exceed 45%, the mortgage Lets help you find a lender, too. Because the borrower has more than $6,000 in a retirement account, evidence of liquidation is NOT required. Justin McHood is a managing partner at Suited Connector and has been recognized by national media outlets as a financial expert for more than a decade. We recommend that you use the latest version of FireFox or Chrome. was made up to and concurrent with loan closing, the loan must be re-underwritten Proposed excluded payment percentage of . debt(s). ), Selling, Securitizing, and Delivering Loans, Research & Technology, News & , or when the unemployment rate rises 1.5 percent in less than twelve months. FAQsnoted by an asterisk* were curated directly from Ask Poli customer inquiries to provide clarity and guidance on trending topics. See If you still have Technical Support questions, Get answers to your Selling Guide & policy questions with Fannie Mae's AI-powered search tool. If the credit report does not show a required minimum payment amount and there is no supplemental documentation to support a payment of less than 5%, the lender must use 5% of the outstanding balance as the borrower's recurring monthly debt obligation. If there is new subordinate debt on the subject property, the mortgage loan must be Installment debts with less than ten payment left can be excluded from your DTI as long as the excluded payment is 5% or less of your gross monthly income. Events, Alimony, Child Support, and Separate Maintenance Payments, Federal Income Tax Installment Agreements, Other Real Estate OwnedQualifying Impact, B2-2-03, Multiple Financed Properties for the Same Borrower, A2-2-07, Life-of-Loan Representations and Warranties, B3-6-07, Debts Paid Off At or Prior to Closing, B3-5.4-03, Documentation and Assessment of a Nontraditional Credit History, B3-6-06, Qualifying Impact of Other Real Estate Owned, How to do a hard refresh in Internet Explorer. the borrower is not using rental income from the applicable property to qualify. Based on the closing sales price of $22.39 per share on June 30, 2013, the aggregate market value of the issuer?s shares held by non-affiliates on such date was $82,729,352. FHA: The borrower must be the co-signer and not primary obligor. long-term debt, i.e., not included in the debt-to-income (DTI) ratio. Execution, Learning Is there anything I should keep in mind after closing? Such accounts A hard refresh will clear the browsers cache for a specific page and force the most recent version of a page. of changes in financial circumstances throughout the origination process and prefunding Press Esc to cancel. additional debt(s) or reduced income after the underwriting decision was made up to B3-2-10, Accuracy of DU Data, DU Tolerances, and Errors in the Credit Report for the tolerances and resubmission requirements associated with changes impacting The lender must recalculate the DTI ratio. All installment debt that is not secured by a financial assetincluding student loans, automobile loans, personal loans, and timesharesmust be considered part of the borrowers recurring monthly debt obligations if there are more than ten monthly payments remaining. & Technology, News & Fannie Mae Freddie Mac -*Student Loan in Forgiveness, cancellation, discharge and employment contingent repayment programs -Monthly payment amount may be excluded from DTI, if file contains evidence Student loans have less than 10 months payments; or Payments are deferred or in forbearance and the full balance will be Note: Changes since the last update are marked either NEWor UPDATED. The lender is tasked to obtain proof that (i) these payments were made during the last 12 months and (ii) there is no history of delinquency during the relevant period. Lease payments must be considered as recurring monthly debt obligations regardless of the number of months remaining on the lease. Events. lender discovers additional debt(s) or reduced income after the underwriting decision transactions, including: cash-out refinance transactions the maximum ratio may be lower for loan casefiles What is required when paying off student loans with a refinance? A hard refresh will clear the browsers cache for a specific page and force the most recent Example #2 Scenario. This policy applies whether or not the other party is obligated on the debt, but is not applicable if the other party is an interested party to the subject transaction (such as the seller or real estate agent). total monthly income of all borrowers, to the extent the income is used to qualify The fund's investments may include obligations of the U.S. government, its agencies and instrumentalities, which are backed by the full faith and credit of the United States (e.g., U.S. Treasury bonds and Ginnie Mae mortgage-backed bonds) or by only the credit of a federal agency or government-sponsored entity (e.g., Fannie Mae or Freddie Mac . Lender Letter LL-2021-03, Impact of COVID-19 on Originations, B3-6-07, Debts Paid off At or Prior to Closing, B2-1.3-03, Cash-Out Refinances Transactions, How to do a hard refresh in Internet Explorer. Fannie Mae's Desktop Underwriter has been known to accept less than 12 payments on a case-by-case basis. Having Issues with Seeing this Page Correctly? version of a page. For debts paid by others, what if the 12-month payment history shows more than one party has made the payments? If a borrower owns other property, where they are on title, but not obligated on the mortgage note, what are the considerations for the property expenses and mortgage payment history of the property? Get answers to your Selling Guide & policy questions with Fannie Mae's AI-powered search tool. (For best result, pose your search like a question. Visit Selling and Servicing Guide Communications and Forms. In what situations may a divorce decree or separation agreement be required? See B3-6-02, Debt-to-Income Ratios and B3-6-03, Monthly Housing Expense for the Subject Property for additional information. Access forms, announcements, lender letters, legal documents, and more to stay current on our selling policies. ), Selling, Securitizing, and Delivering Loans, Research & Technology, News & The party making the mortgage payments is obligated on the mortgage loan. FHA: You can omit these debts as long as the payment is less than 5% of your monthly income. meets the credit score and reserve requirements reflected in the Eligibility Matrix. debts or reduced income. If you still have Technical Support questions, out refinances, ARMs with initial adjustment periods less than 5 years, and co-op share loans. ten months; monthly payments on installment debts and other mortgage debts that extend ten months For DU loan casefiles, the DTI ratio should Debt payments such as a student loan or balloon note scheduled to begin or come due within 12 months of the mortgage loan closing must be included by the Debt Funding Summary. Annual Income: Full-time $100,000 (just took a $9k/yr pay cut when relocated Oct 1st) Part-time (1) $12,000 (over 2 years) CS: $9600 (over 3 years left) Rental property: $1200 (I read only 70% counts toward income) Less than 2 years: be paid through an installment agreement that can be included as a monthly debt obligation, Such accounts do not need to be closed as a condition of excluding the payment from the DTI ratio. How are monthly lease payments considered in the DTI ratio? What does DU require for past-due accounts? Access forms, announcements, lender letters, legal documents, and more to stay current on our selling policies. The Debt Securities, together with interest thereon, are not guaranteed by the United States and do not constitute a debt or obligation of the United States or of any agency or instrumentality thereof other than Fannie Mae. payment amount (see B3-6-05, Monthly Debt Obligations; the qualifying payment amount if the subject loan is for a second home or investment These obligations include items such as. Lenders may use discretion to not include this mortgage debt if the amount does not significantly affect the borrower's ability to meet credit obligations. What is required if additional debt or reduced income is discovered after the underwriting decision? A copy of the divorce decree, separation agreement, court order, or equivalent documentation confirming the amount of the obligation must be obtained and retained in the loan file. are met, and lenders consistently apply the same approach to similar loans. Having Issues with Seeing this Page Correctly? Changes In FHA Guidelines For Installment Debts Less Than 10 Months Under the old HUD mortgage lending guidelines, any installment debts that have less than 10 months left may be excluded from the calculation of the borrower's debt to income ratios. The final loan application signed by the borrower must include all income and debts Fannie Mae Updates on Excluding Mortgage Debts Paid by Others From DTI, House Bill Adjusts HMDA Requirements for Small Lenders, Senators Propose Measures to Protect Consumer Data Post-Equifax Breach, HUD: $2-Bil. confirmation that any financing contingencies have been cleared. When a borrower uses his or her financial assetslife insurance policies, 401(k) accounts, individual retirement accounts, certificates of deposit, stocks, bonds, etc.as security for a loan, the borrower has a contingent liability. If the HELOC does not require a payment, there is no recurring monthly debt obligation so the lender does not need to develop an equivalent payment amount. Rates are low and now is your time to refinance and lock in a lower rate! Access forms, announcements, lender letters, legal documents, and more to stay current on our selling policies. For more information about how DTI ratios are calculated, speak with a lender today. For manually underwritten loans, Fannie Maes maximum total DTI ratio is 36% of the How does DU determine if an installment loan being paid off with the cash-out refinance transaction is a student loan? More often than not, an installment loan (i.e. information from other Fannie Mae published sources. Get answers to your Selling Guide & policy questions with Fannie Mae's AI-powered search tool. ), Selling, Securitizing, and Delivering Loans, Research see below: fannie fannie mae excluding installment debt less than 10 months. For information about deferred student loans, see Student Loans below. For alimony and separate maintenance obligations, the lender has the option to reduce the qualifying income by the amount of the obligation in lieu of including it as a monthly payment in the calculation of the DTI ratio. be recalculated outside of DU. assessment must be performed. While every effort has been made to ensure the reliability of the content in Ask Poli, Fannie Mae's Selling Guide and its updates, including Guide Announcements and Release Notes, are the official statements of Fannie Mae's policies and procedures, and should be complied with in the event of discrepancies between information provided . Minor (non-substantive) wording, number, and heading changes are not marked. how fha loans use your installment and revolving debts - if you do not have more than 10 months left to pay on is still eligible for delivery. information from other Fannie Mae published sources. Debt To Income Ratio Calculations By Mortgage Underwriters & Technology, News & Can you exclude installment debt on FHA loan? For a comprehensive list of resources such as access forms, announcements, lender letters, notices and more. For additional information Lenders may use discretion to not include this mortgage debt if the amount does not significantly affect the borrower's ability to meet credit obligations. Download our eBook of the most popular mortgage FAQs, speak with an experienced mortgage broker. We recommend that you use the latest version of FireFox or Chrome. High LTV refinance loans: For loans underwritten in accordance with the Alternative & Insights, Pricing & Qualification Path, there are no maximum DTI ratio requirements (see feel free to email. Please take a few minutes to watch a short training video. D1-2-01, Lender Prefunding Quality Control Review Process. Total borrower funds needed to close is $20,000. 8, 2022 . indication that a Notice of Federal Tax Lien has been recorded against the borrower December 28, 2022. If the debts do belong to the borrower, they must be included as part of the borrowers recurring monthly debt obligations. Ask a full question like, How do I document overtime or bonus income?, How to do a hard refresh in Internet Explorer. Fannie Mae makes exceptions to the maximum allowable DTI ratios for particular mortgage underwritten loans and DU loan casefiles (see Compare the $8,400 in the retirement account to the additional $5,000 of funds needed to determine if evidence of liquidation is required. The subject mortgage will be included in the count of multiple financed properties and its unpaid principal balance used to calculate. What is required for a student loan monthly debt obligation? All installment debt that is not secured by a financial assetincluding student loans, automobile loans, personal loans, and timesharesmust be considered part of the borrower's recurring monthly debt obligations if there are more than ten monthly payments remaining. If the borrower discloses, or the lender discovers, additional liabilities after the underwriting decision has been made, up to and concurrent with closing, the lender must recalculate the borrower's debt-to-income ratio. Having Issues with Seeing this Page Correctly? A hard refresh will clear the browsers cache for a specific page and force the most recent For student loans in an income-driven repayment plan or graduated repayment plan, do I need to consider the expiration date when determining the qualifying payment? For more information, refer to B3-6-05, Monthly Debt Obligations in the Selling Guide. The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies. when qualifying borrowers. the subject property during the loan process, the mortgage loan must be re-underwritten. The following steps are required if the borrower discloses or the lender discovers TALF 45. Top Lender Questions on Monthly Debt Obligations. quality control processes to increase the likelihood of discovering material undisclosed Execution, Learning For additional information, see B3-6-02, Debt-to-Income Ratios. How can I ensure that student loans are paid in full for a student loan cash-out refinance? treated as installment loans rather than mortgage debt, even if they are identified as mortgage debt on the credit report (or other documentation). In this regard, Fannie Mae has recently issued a clarification regarding mortgages paid by others in calculating a borrowers DTI ratio. In 2008, the government poured about $170bn into Fannie Mae and its smaller sibling, Freddie Mac, to save them after the financial crisis.Fannie Mae received about $116bn in loans. car loan or student loan) can be excluded during the approval process so long as you only have 10 payment or less to make. When a debt is being paid by another party can payment histories be combined if there was an interruption in payments due to a refinance or trade-in? The lender is not required to evaluate the payment history for the assigned debt after the effective date of the assignment. Ask Poli features exclusive Q&As and moreplus official Selling & Servicing Guide content. 12 months of canceled checks and/or 12 months of bank statements of the main borrowers who has been responsible for the debt payments will be required to be able to use this exemption. fannie mae excluding installment debt less than 10 months. How much should I expect to pay in closing costs. A hard refresh will clear the browsers cache for a specific page and force the most recent If ten or less months of repayment remains per the plan, the monthly debt may be excluded if the payment does not exceed five percent of the monthly repayment income. See What is required for child support or alimony obligations? Your monthly car payment with 9 payments left: $300. ), Selling, Securitizing, and Delivering Loans, A borrower's monthly debt obligations mustbe considered when underwriting a loan. Get answers to your Selling Guide & policy questions with Fannie Mae's AI-powered search tool. Execution, Learning The borrowers history of credit use should be a factor in determining whether the appropriate approach is to include or exclude debt for qualification. Visit Selling and Servicing Guide Communications and Forms. Equal Housing Opportunity. Qualification Path, if the recalculated DTI ratio exceeds 45%, the loan is not eligible & Technology, News &