A common issue in mortgage operations teams is a habit I call “Guideline Lumping.” This is when we don’t slow down and read the detailed statements in the guidelines. A fast reading has us applying these rules across the board, when they might not be applicable.
Because pensions are listed under guidelines in the “Retirement, Government Annuity, and Pension Income” area of FNMA( B3-3.1-09), the rule about confirming the three years continuance can incorrectly be lumped into all of these types of income under that section.
For FNMA, this section only says to check for three years continuance IF the income is paid in the form of a distribution from a 401(k), IRA, or Keogh retirement account. This is because those funds are finite, unlike large pension funds which in theory go on for the life of the borrower.
Also note in FNMA B3-3-1-01 there is a chart that shows “Continuity of Income” that says this:
Unless the lender has knowledge to the contrary, if the income does not have a defined expiration date and the applicable history of receipt of the income is documented (per the specific income type), the lender may conclude that the income is stable, predictable, and likely to continue. The lender is not expected to request additional documentation from the borrower.