New FNMA change is declining more borrowers

Video Overview – FNMA SEL-2014-16

Have you looked at the new FNMA SEL-2014-16 posted in December of 2014?  If you work with self employed borrowers who own a partnership (1065 tax form) or S Corp (1120S tax form) you need to know the details of this announcement.  Borrowers who would have been approved weeks ago are now being declined.  This video walks through the regulation and the new calculations required.

4 responses to “New FNMA change is declining more borrowers”

  1. This is a big change – essentially closes the depreciation/depletion loophole for SE underwriting… It’s funny that FNMA has come out with a new 1084, new rental income analysis now. I’ve seen all kinds of self-employment classes teaching the old method… guess those are in the trash now.

    What do we do to help the SE borrower now?

    • Michael Whitbeck says:

      Hi Thomas
      I agree one of the bigger changes I have seen in income calculations in my career. FHLMC has not put any guideance for these changes, so it might be best to run LP on these borrowers! I have had some people state this is not the case on these changes but the notice and the change to the 1084 to me lead to exactly what I put on the video. I would like some others to weigh in! I know Genworth is teaching this the same way I see it. Thanks!!

  2. Tim Brown says:

    Very helpful. I do find it illogical that a borrower who owns 24.5% of a business cannot add back any adjustments to cash flow. For example I just turned down a file where a borrower’s 2013 K-1 income was -$76,000 but his share of depreciation was $98,000.

    It would seem there should be a logic test to the 25% threshhold for being considered self-employed. Your thoughts?

Leave a Reply

Your email address will not be published. Required fields are marked *