Announcement 2020-141 - Conventional Underwriting Self Employed Income Updates

Conventional Underwriting Self Employed Income Updates

 

Fannie Mae and Freddie Mac are revising their documentation requirements to ensure the self-employment income is documented and stable.

Effective for loan applications taken on or after December 14, 2020 the following will be required:

 

Current Policy

New Policy

When an unaudited year-to-date P&L is obtained, two (2) months bank statements is required

When an unaudited year-to-date P&L is obtained, three (3) months bank statements is required

For Example: The business depository account statements can be no older than August, September and October for a year-to-date profit and loss statement dated through October 31

 

When reviewing the year-to-date P&L, determine if the business revenue, expenses, and net income documented in the unaudited year-to-date P&L are reasonably consistent with the revenue and expense cash flow documented on the business account statements.

When reviewing the year-to-date P&L, determine if the business revenue in the unaudited year-to-date P&L are reasonably consistent with the revenue cash flow documented on the business account statements.

 

 

Please reference the NewRez Lending Library for full details of the changes outlined in this announcement.