Announcement: Self Employed Borrowers - FNMA/FHLMC

This guidance is made in addition to prior bulletins.  It does not replace or eliminate any prior guidance.

Both FNMA and FHLMC have added guidance for self-employed borrowers to ensure their business cash flow has not been negatively affected by COVID.  In general, the new documentation required is:

Self-Employment Income

Due to changing market and economic conditions, the following documentation is required on all new loan submissions, effective Monday, June 8th.

• An Audited year to date profit and Loss Statement reporting business revenue, expenses and net income up to and including the most recent month preceding the loan application; or
• an unaudited year to date profit and loss statement signed by the borrower reporting business revenue, expenses and net income up to and including the most recent month preceding the loan application date, and two business depository account(s) statements no older than the latest two months represented on the year to date profit and loss statement.
  • For example, the business depository account statements can be no older than April and May for a year to date profit and loss statement through May 31, 2020
  • The Underwriter will review the two most recent depository account statements to support and/or not to conflict with the information presented in the current year to date profit and loss statement.  Otherwise, the lender must obtain additional statements or other documentation to support the information from the current year to date profit and loss statement.

Underwriters must review both FNMA and FHLMC bulletins in full, to determine analysis requirements for each agency, after obtaining the above documentation.

FNMA Bulletin: Click Here

FHLMC Bulletin: Click Here

Note: The year to date profit and loss statement must be no older than 60 days old as of the note date.

MISC:

• Unemployment income is not eligible for qualifying purposes unless the employment is clearly associated with seasonal employment.
• Borrowers on furlough are not eligible until the employee(s) actually return to work.

Please contact your Account Executive with any additional questions.