MFG Banking – FNMA Guideline Changes

fannie-mae-logoStocks, Bonds and Mutual Funds
Fannie Mae (FNMA) is updating the policies related to the use of vested stocks, bonds, and mutual funds (including retirement accounts) when they are used for down payment, closing costs, and reserves. Instead of requiring a standard reduction in value, the policies have been simplified as follows:

 

  • One hundred percent (100%) of the value of the asset is allowed when determining available reserves.
  • If the lender documents that the value of the asset is more than at least 20% than the funds needed for the borrower’s down and payment closing costs, no documentation of liquidation is required. Otherwise, documentation of the borrower’s actual receipt of funds realized from the sale or liquidation must be obtained.
Unreimbursed Business Expenses (2106)
For a borrower who is qualified using base pay, bonus, overtime, or commission income less than 25% of the borrower’s annual employment income:

 

  • Unreimbursed employee business expenses are not required to be analyzed or deducted from the borrower’s qualifying income, or added to monthly liabilities. This applies regardless of whether unreimbursed employee business expenses are identified on tax returns (IRS Form 2106) or tax transcripts received from the IRS.
  • Union dues and other voluntary deductions identified on the borrower’s paystub do not need to be deducted from the borrower’s income or treated as a liability.
  • Tax returns are no longer required to document these sources of income.For borrowers earning commission income that is 25% or more of annual employment income, unreimbursed employee business expenses must be deducted from gross commission income regardless of the length of time that the borrower has filed that expense with the IRS.
  • The exception to this is if the expense is an actual automobile lease or loan payment. If borrowers report an automobile allowance as part of their monthly qualifying income, the lender must determine if the automobile expenses reported on IRS Form 2106 should be deducted from income or treated as a liability.
IRS W2 Transcripts in Lieu of W2’s

Fannie Mae will also now permit an IRS “Wage and Income Transcript” (W-2 transcript) in lieu of the actual W-2 forms. MFG will accept transcripts if the borrower is unable to locate copies of their W2’s only.
Departure Residence Equity Requirement

Fannie Mae has removed the minimum equity requirement for a primary residence being converted to a second home or investment property. Reserve requirements and rental income calculations for these types of properties are unchanged.