Today we’re going over the Union Worker update published in Fannie Mae SEL 201A-08 posted 10/02/18. Now this is not a major update or change of policy. However, I wanted to blog about this because it brings a fair amount of questions during training sessions. Union workers tend to be confusing because they have multiple elements of income evaluation. Examples like temporary work assignments, multiple rates of pay, and a lot of extra W-2 and paystubs as compared to the normal borrower.
Changes noted in FNMA SEL 2018-08
Fannie Mae noted the following :
Where a union facilitates the borrower’s placement in each assignment. where a union facilitates the borrower’s placement in each assignment. In these cases, the Selling Guide now permits this type of union to provide:
• the verbal verification of employment for a union member who is currently employed, and
• an executed employment offer or contract for future employment for a union member who is not scheduled to begin employment until after the loan closes. All other existing requirements for employment offers or contracts described in B3-3.1-09, Other Sources of Income, apply.
What union workers are Fannie Mae talking about?
Typically a union that will provide placements (which meets the unions we are talking about in the Fannie Mae Update) is involved mainly in project that constructs or creates things. Here is an example of the scenario you will see. A borrower is member of a union as a master carpenter. Builders who build houses will come to the union hall to hire carpenters for two days, two weeks, two years. The duration all depends on the amount of work needed. The borrower works with that employer for a period of time and then returns to the union hall to wait for their next job.
This next job may take a day or up to weeks to get. In today’s economy there is such a short supply skilled trades there generally is NO waiting for the next job. Most union halls have a back log of requests and not enough qualified people to fill them. Once back at the union hall the cycle repeats. There are many people that make a living this way, from project to project. The type of professions you see this commonly is longshoreman, sound engineers, pipe fitters, electricians, welders, and carpenters.
Tips to handle union workers
So a couple more tips I can provide going over this topic. I want to recommend you to join our training program and watch our full video on how to do union employment (and dozens of other processing/underwriting topics)
First tip, use variable income rules to determine the income. These borrowers have different rates, shifts, and premiums at each job. It is truly better to “lump” all the income as base and average it. The typical definitions of base pay, overtime, and bonus generally do not work for them.
Second tip don’t change the 1003 and put down twenty employer, use the union as their employer and get any “verification of income / current employment” from them.
Third tip always explain on your 1008 the borrower is a “trade union worker” and has multiple jobs, with W2s and multiple rates. In detail, show the math no how to the income used to qualify, which again using like a variable income format is best.
That wraps it up for today, you can learn more about the training I mentioned by going to https://blueprintio.wpengine.com/training/ It is free to sign up and look at the first five modules!