Self-Employed Borrower Fannie Mae Cash Flow Form 1084 Part I... · Fannie Mae Cash Flow Analysis...
Transcript of Self-Employed Borrower Fannie Mae Cash Flow Form 1084 Part I... · Fannie Mae Cash Flow Analysis...
Genworth Mortgage Insurance Corporation ©2017 Genworth Financial, Inc. All rights reserved.
Self-Employed Borrower
Fannie Mae Cash Flow Form 1084 Part IPersonal Tax Returns
April 2017
Investors (Fannie Mae, Freddie Mac, Private Investors) require it be
determined that self-employed borrowers demonstrate the financial
ability to repay the mortgage.
– History
– Income calculation
– Continuance / Stability of income
Lender Responsibility
2Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Objective
Learn to use the Fannie Mae Cash Flow Analysis Form (Form 1084)
and data from tax returns to calculate supportable self-employed
borrower income.
– W-2 wages from a business owned by the borrower
– Interest income earned by a business
– Income from a Schedule C (Sole Proprietor)
– Consideration of Capital Gains & Losses Schedule D
– Net Rental Income from Schedule E
3Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Fannie Mae Updates
SEL 2015-09– Cash Flow Analysis Form updated
– Sections of Chapter B3-3-2 for Self-
Employed Borrowers updated
• Evidence of liquidity if no distributions made
from partnerships or S corps
– DU updated to allow one year personal
and business tax returns for certain case
files
– Changes effective for applications dated
February 1, 2016
4Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Note The Requirement To Evidence Access To Income Has Been
Removed By Fannie Mae
2016 Fannie Mae Updates
SEL 2016-05– Updates to Business Income
• Eliminate requirement to confirm
borrower has access to income
• Guidance for methods lenders may use
to determine adequate business liquidity
when liquidity assessment is required
• Two year history required to use
guaranteed payments
• Verbal verifications of employment for a
self-employed borrower can be obtained
within 120 days prior to note date
– Chapter B3-3-1.07, 09 and B3-3-2 of
the Selling Guide have been updated
– Effective on or before October 1, 2016
but lenders and implement
immediately
5Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
SEL 2016-08
6Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
8Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
9Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
mi.genworth.com
www.mi.genworth.com
10Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Self-Employment Fannie Mae
12Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Self-Employment Fannie Mae
13Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Written Analysis of Income-Fannie Mae
Fannie Mae 2016 Selling Guide B3-3.2-01, Underwriting Factors and
Documentation for a Self-Employed Borrower (06/28/2016)
14Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Written Analysis of Income-Fannie Mae
15Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Fannie Mae 2016 Selling Guide B3-3.2-01, Underwriting Factors and
Documentation for a Self-Employed Borrower (06/28/2016)
Form 1088 Trend Analysis
16Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Requirements for Use of Business Assets
18Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Can checking the Self Employed Indicator to “Yes”
increase the risk of the loan when evaluated by DU?
YesNo
Does Borrower Own 25% Or More Of A Business?
19Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
DU/DO Release Notes DU Version 10.0- Appendix A
20
You’ll Need
21Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
The Case Study
:You will be working with John and Mary Homeowner who
– Own a Schedule C business called Red Carpet Security (John)
– Have interest income earned from a partnership
– Have capital gains/loss activity reported on a Schedule D
– Own an existing rental property shown on a Schedule E
– Own 50% of an LLC called MHI (Mary)
• Reported on a Partnership Return
• Mary receives a K-1
– Own 100% of an S Corporation called Always Watching Security, Inc. (John)
• John receives a K-1
• John receives a W-2 Wage Statement from the business
22Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
:Review for
– Identifiers
• Name
• Address
• Social Security Number
– All pages and schedules
– Any Red Flags
– Date
• Most recent
– Signatures
Form 1040
23Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 2
Calculator and Quick Reference Guide
Access your Quick Reference Guide 1084 Form and Case Study
24Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Does Our Applicant Have Ownership?
?Is this W-2 wage for Self-Employed or Salary income
25Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 1
Schedule E to Validate Ownership
26Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 11
1120S K-1
27Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 25
Review Form 1040, Line 7 for any additional W-2 Wages
– Review each W-2
– Determine if applicant owns 25% or more of the business
• If yes it is considered self-employed income
• If no, calculate that income on a different form or separately
Any Other W-2 Wages?
28Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Interest and Dividends
Don’t use unless needed for
qualifying
– Two year history of stable receipt and
likelihood of continuance required
– Only use when earned from assets
owned by “a business only”
– Typically will say “From K-1” or from
the business the borrower owns
– Check investor overlays before using
35Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 5
Schedule C
36Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 6
Schedule C
37Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 6
Schedule C
38Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 6
Schedule C
39Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 6
Schedule C
40Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Schedule C
41Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 6
Schedule C
42Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 6
Schedule C
43Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 6
Schedule C
44Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Schedule C
45Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 6
Schedule C
46Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Schedule C
47Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 6
Schedule C
48Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Schedule C
.Only the $2,500 amortization is added back on the form or calculator
49Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 7
Schedule C-Line 9 Car and Truck Expenses
Use This Depreciation Adjustment Option Only When Investor Policy
Allows And The Adjustment Is Needed To Qualify.
50Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Schedule C
Additional depreciation can be found by multiplying business miles on
44a x IRS depreciation factor for that year.
51Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 7
Schedule C
Use This Depreciation Option Only When Investor Policy Allows And The
Adjustment Is Needed To Qualify
52Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Schedule C
Verify 4562 is for the Schedule C
53Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 13
Schedule C
Business miles of 7899 x .24 cents = $1,895 in additional
depreciation that could be added back.
54Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 15
IRS Publication 463
55Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Schedule C
56Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Schedule D Capital Gains
Don’t use unless needed for qualifying
– Two year history, stable receipt and likely
to continue
– Check investor overlays before using
– Let’s Review the 1040 Line 13
58Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Pages 2, 8, 9
Schedule D
Where Did The $16,544 Loss On Line 6 Come From? The
1040 Showed A $3,000 Loss.
59Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 8
Schedule D
60Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 9
Schedule E – Part I Royalty Payments
Use Section 5 for Royalty Payments only (If applicable)
– Follow Investor guidelines for documentation and continuance
– Use only if needed
61Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 10
– Locate Calculator and Quick Reference
Guide for Rental Income
– Turn to Schedule E, Part I, Rentals
– Rental Income has been removed from
the Cash Flow Analysis Form
Genworth Rental Income Calculator
62Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 10
Mortgage Statement/Payment Coupon
:A mortgage statement/payment coupon can verify
– If loan is impounded or escrowed
– What property is associated with the mortgage payment
– Current tax and insurance information
– Current HOA dues: most investors want verification PUD, Condo or Coop
64Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Mortgage Statement/Payment Coupon
65
For Non-Impounded Loans: Obtain Tax And Insurance Information.
Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Payment Information Below Is From a Borrower Provided Mortgage
Statement And HOA Coupon.
– Taxes, Insurance and HOA Dues are Impounded
HOA DUES $165
$1,687
66Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
67Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 10
2016 Schedule E Rental Income
68Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
69Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 10
2016 Schedule E Rental Income
70Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
71Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 10
2016 Schedule E Rental Income
72Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
73Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
2016 Schedule E Rental Income
74Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
75Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 10
2016 Schedule E Rental Income
76Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
77Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
2016 Schedule E Rental Income
78Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
79Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 10
2016 Schedule E Rental Income
80Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
81Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Page 10
2016 Schedule E Rental Income
82Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
2016 Schedule E Rental Income
83Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Compare “rental income” figure with
loan application (Fannie Mae Form
1003)
– Most systems calculate rental income
from the REO section of the 1003
– Review the 1003 to verify what appears
as rental income/rental loss
– If the number is different, override your
system to reflect the true income/loss
based on the tax returns
Net Rental Income
$-131
84Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Net Rental Income
.Do not use leases; Use the “Cash Flow” from the property
– Flag the mortgage payment in your system as a rental property lien so that it will
NOT count it in the debt ratio
– You may need to override your REO Section
44 Renters Way225,000 180,400 3,500 2,500 875 -131
$1,852
85Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
R
87Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
88Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
mi.genworth.com/LenderServices/Underwriting
89Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Quick Reference Guide and Webinars
90Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Quick Reference Guide and Webinars
91Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Genworth Rate Express® Updated!
Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I 92
Rate Express
Access Genworth Rates Using Rate
Express Mobile App Or Desktop
– Only 5 Required Fields
– Find Our MI Rates And Products And
Compare Them To FHA
– Find Previous Quotes With “Scenario ID”
– Like The Rate? Order MI Directly From
The Results Screen!
– Compare Up To 4 Quotes!
Visit mi.genworth.com To Run A Rate Today!
93Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Genworth Rate Express
94Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
104Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
GENWORTH RESOURCES
ActionCenter®: 800 444.5664
Your Local Genworth Underwriting Manager
Your Genworth Account Executive or Manager
105Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Legal Disclaimer Genworth Mortgage Insurance is happy to provide you with these training materials. While we strive
for accuracy, we also know that any discussion of laws and their application to particular facts is
subject to individual interpretation, change, and other uncertainties. Our training is not intended as
legal advice, and is not a substitute for advice of counsel. You should always check with your own
legal advisors for interpretations of legal and compliance principles applicable to your business.
,GENWORTH EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED
INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO THESE MATERIALS AND THE RELATED TRAINING. IN
NO EVENT SHALL GENWORTH BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, PUNITIVE,
OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER WITH RESPECT TO THE TRAINING
AND THE MATERIALS.
Genworth Mortgage Insurance Offers A Comprehensive Suite Of Training
Opportunities To Boost Your Know-How, Benefit Your Bottom Line, And Serve Your
Borrowers Better. Visit mi.genworth.com To Learn More.
Collateral Underwriter®
or CUTM, Home Ready®
and Desktop Underwriter®
or DU are registered Trademarks of Fannie Mae
Home Value Explorer (HVE) is a registered trademark of Freddie Mac
Loan Product AdvisorSM and Loan Collateral AdvisorSM are registered Service Marks of Freddie Mac
ActionCenter® and Rate Express® are registered trademarks of Genworth Mortgage Insurance
Simply UnderwriteSM is a service mark of Genworth Mortgage Insurance