Freddie Mac Bulletin 2022-18 offers new method of income calculations for 1099 borrowers.

The United States is looking at earning income much differently than it did just a decade ago.  With industry mavericks like Uber changing the way Americans get around cities, they and other companies led the way into our new Gig Economy.

The effect this has had on the mortgage business is to create a group borrowers that do not fit into the employed borrower bucket, or the self employed borrower bucket.  These gig workers are addressed in Freddie Macs Bulletin 2022-18.  Freddie Mac uses a much more official term for this type of work which is “Form 1099 Services Performed” as stated in the letter.



What changed?

The guidelines provided limited guidance on how to calculate the income from the service workers and lumped them in with self employed borrowers using IRS Schedule C to report their income.  The new guidance allows these areas of workers to be treated more like commissioned employees now then business owners.

Before we go too far I want to cite the bulletin and the link to the Freddie Mac guidelines


Who Qualifies?

Bulletin 2022-18 gives very direct guidance on who qualifies here are the bullet points

  • Must have a two year history
  • 1099 received must exactly match their previous SCHEDULE C Line 1 gross sales
  • Only 5% write-off of non cash expenses or less
  • No cost of goods sold listed on the SCHEDULE C


How is the income calculated different?

When you review the letter, the basic differences are the services contractor use YTD and most recent year Schedule C.  Whereas the self employed Schedule C borrower uses the last two tax years to evaluate.

As I stated above, this more mirrors how you look at a variable income employed that earns commission rather than a self employed borrower.

We created a video giving greater detail on the rules and examples on how you calculate the income. Below is a link to our YouTube channel and content!