In Fannie’s latest announcement, SEL 2012-4, they covered 3 separate issues, but the one you need to really sink your teeth into are the changes to the new way income and employment will now be viewed. Before I get into some of the changes, right now, these apply to manually underwritten files, with the DU implementation right around the corner.
First, there are a total of 60 changes that affect 9 distinct topics that now show up in the Selling guide.
Here’s a highlight of some of them…
1. You’ll find a new section describing how to determine variable income such as overtime, bonus, and commission income
2. A new section called “continuity of income” now states that if the income does not have an expire date, the lender should conclude that it’s likely to continue and no need to document the 3-year continuance. This goes for SS, Disability and retirement income
3. The 4506T only has to be signed one time.
4. VOE can be used in lieu of paystub, W-2’s
5. If your borrower has rental income, only need 1 year’s tax returns—instead of 2 and the operating statement is no longer required.
6. Now allows for employment offers and contracts to use the income instead of delaying the closing to get a 30-day paycheck stub.
7. Child support proof has been reduced to 6 months
8. And if the borrower receives retirement income, there are new requirements.
These all went into effect on May 15 but be sure to follow up with your lenders and their overlays.
As you can see, some of these changes are going to make your life easier but you’ll need to read every single one of them and review the files you have in process now. This is one of the bigger changes we’ve seen in employment and income underwriting in years.
More info can be found www.MortgageCurrentcy.com