self-employed borrower schedule analysis method or sam › documents › … · self-employed...
TRANSCRIPT
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Genworth Mortgage Insurance Corporation ©2018 Genworth Financial, Inc. All rights reserved.
Self-Employed Borrower
Schedule Analysis Method or SAMPart I: Personal Tax Returns
November 2018
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Lender Responsibility
Investors (Fannie Mae, Freddie Mac as well as Private Investors)
require that we determine that the self-employed borrower
demonstrates the financial ability to repay the mortgage.
– History
– Income calculation
– Continuance / Stability
– Ability to repay the mortgage
Schedule Analysis Method Part I
Session Reviews Conventional Loans Only; Today’s Session Reviews
Personal Tax Returns; Business Returns Are Reviewed In Part II
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Schedule Analysis Method Part I
Objective
-Learn to use SAM Form to calculate supportable income for self
employed borrowers using personal tax returns
– 2017 personal tax returns
Fannie Mae policy varies from Freddie Mac
– We will review both in today’s session
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Does Borrower Own 25% Or More Of A
Business?
Schedule Analysis Method Part I 4
Can checking the Self-Employed Indicator to yes-
increase the risk of loans when evaluated by DU®? Loan
Product Advisor®?
YesNo
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Self-Employment Fannie Mae
Schedule Analysis Method Part I 7
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Self-Employment Fannie Mae
Schedule Analysis Method Part I 8
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Written Analysis of Income-Fannie Mae
Fannie Mae 2016 Selling Guide B3-3.2-01, Underwriting Factors and
Documentation for a Self-Employed Borrower (06/28/2016)
Schedule Analysis Method Part I 9
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Schedule Analysis Method Part I
Implementation Of Income Requirements
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Freddie Mac Documentation Matrix
Documentation Matrix
– Assists in underwriting and
documenting loans for Freddie Mac
– Lenders may have overlays
– Check specific program
requirements
– Updated September 2018
Schedule Analysis Method Part I
http://freddiemac.com/learn
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Freddie Mac Seller/Servicer Guide
Schedule Analysis Method Part I
When Do We Have To Tell Loan Product Advisor Our Borrower Is Self-
Employed?
Updated and Effective September 19,2018
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Schedule Analysis Method Part I
Freddie Mac Self-Employed Documentation
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Schedule Analysis Method Part I
Freddie Mac Self-Employed Documentation
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Schedule Analysis Method Part I
Freddie Mac Self-Employed Documentation
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Schedule Analysis Method Part I
Chapter 5304
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Schedule Analysis Method Part I
Chapter 5304
5304.1 Stable Monthly Income
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Schedule Analysis Method Part I
5304 Income NOT On the Personal Returns
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Updates For Freddie Mac 2017-12
Schedule Analysis Method Part I
Effective for loans with settlement
dates on or after March 1, 2019;
Sellers may implement immediately
– Short-term and long-term rental income
sources for refinance transactions
– Updates policy for rental properties NOT
owned in the prior calendar year
– Reintroduces Guide Form 1000 and retires
Operating Income Form 998
– Introduces Form 92 for Rental Income
– Revised Form 91 (Income Calculations)
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Freddie Mac Form 91
Freddie Mac Income Calculation Form 91 Updated August 2017
– Sellers are required to analyze self employed borrowers using Freddie Mac
Form 91 or a similar form
• Updates include removal of Rental income, 2106 expenses, 4797 and 6252
– The form should be maintained in the loan file
– Form can be used for “other types” of non-self employed income such as
commissioned income, and capital gain income
– Borrowers that have 25% or more ownership in a business are considered self
employed for Freddie Mac qualifying purposes
– Tax returns may be required for additional scenarios such as:
• Applicants working for family members
• Working for the property seller
• Commission income of 25% or more
• Rental or Farm Income
Schedule Analysis Method Part I 22
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Training Tools and Information
Schedule Analysis Method Part I 2424
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Schedule Analysis Method Part I 25
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You’ll Need
Schedule Analysis Method Part I 26
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The Case Study
:You will be working with John and Mary Homeowner who
– Own a Schedule C business called Impressive Images (John)
– Have interest income earned from personal assets
– Have capital gain/loss activity reported on a Schedule D
– Own an existing rental property shown on a Schedule E
– Own 33.33% of an LLC called Street Art Design Company (John)
• Reported on a 1065 Partnership Return
• John receives a K-1
– Own 100% of an S Corporation called Modern Dwelling Enterprises, Inc. (Mary)
• Income reported on 1120S Tax Return
• Receives a K-1
• John and Mary Receive W-2 Wage Statements from the business
Schedule Analysis Method Part I 27
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Calculator And Quick Reference Guide
You will need Quick Reference Guide
Schedule Analysis Method Part I 28
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:Review for
– Identifiers
• Name
• Address
• Social Security Number
– All pages and schedules
– Any Red Flags
– Date
• Most recent
– Signatures
Form 1040
Schedule Analysis Method Part I
Page 3
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Calculator and Quick Reference Guide
?What Document Should you Review
Schedule Analysis Method Part I 30
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Is this W-2 wage self-employment or salary income?
Does Our Applicant Have Ownership?
Schedule Analysis Method Part I
Page 1
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Schedule E to Validate Ownership
Schedule Analysis Method Part I
Page 12
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IRS Form K1
Schedule Analysis Method Part I
Page 31
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Schedule Analysis Method Part I
Does Our Applicant Have Ownership?
?SEB Or Salary Income? What will you enter on your form
Page 1
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SEB W-2 Wages- Was there a second W-2?
Schedule Analysis Method Part I
Page 2
*Use of this income is subject to review of the business tax return
*
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Does Our Applicant Own 25% or more?
Does this income go on our SAM worksheet? Can we use it to
qualify?
Page 2
Schedule Analysis Method Part I 36
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Tax-Exempt Interest Income
Schedule Analysis Method Part I
Page 3
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Alimony Received
Schedule Analysis Method Part I
Page 3
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IRA Pension/Annuity Income
Schedule Analysis Method Part I
Page 3
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Recurring Unemployment Compensation
Schedule Analysis Method Part I
Page 3
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Social Security Income
Schedule Analysis Method Part I
Page 3
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Other Income: What Are Some Examples?
Schedule Analysis Method Part I
Page 3
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Total Section Allows Division by 12 or 24
Schedule Analysis Method Part I 43
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Form 2106 Employee Business Expenses
?Was the applicant required to file an IRS Form 2106 with their returns
– Check page two of the 1040 to verify if borrower “Itemized” or took the “Standard
Deduction”
Schedule Analysis Method Part I 44
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Review Line 40 Entry vs. Standard Deduction Values on Page 2 of IRS
Form 1040
Itemized Or Standard Deduction Taken
Schedule Analysis Method Part I
Page 4
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Schedule A For Business Expenses
Review Schedule A, Line 21 for
unreimbursed employee expenses
Schedule Analysis Method Part I
Page 5
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Form 2106 Employee Business Expenses
?Were the applicants required to file IRS Form 2106
– John and Mary did not have any unreimbursed business expenses
• We will enter zero
– If applicants do have expenses, follow instructions on the quick reference guide
Fannie Mae And Freddie Mac Guidelines Are Now In Alignment; But Always
Follow Investor Guidelines As Overlay Exist
Schedule Analysis Method Part I 47
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IRS Publication 463
Schedule Analysis Method Part I 48
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Interest And DividendsDon’t use unless needed
– Look for:
• Two year history of stable receipt
• Likelihood of continuance
• Income may be listed on 1040, Lines
8a and/or 9a as sometimes there is no
schedule B
• Review for income from assets held by
a business
• Check guidelines for usage information
as Fannie and Freddie are different
Schedule Analysis Method Part I
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Schedule C Sole Proprietorship
Schedule Analysis Method Part I
Page 7
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Schedule C Sole Proprietorship
Schedule Analysis Method Part I
Page 7
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Schedule C Sole Proprietorship
Schedule Analysis Method Part I
Page 7
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Schedule C Sole Proprietorship
Schedule Analysis Method Part I
Page 7
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Schedule C Sole Proprietorship
Schedule Analysis Method Part I
Page 7
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Schedule C Sole Proprietorship
Schedule Analysis Method Part I
Page 7
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Schedule C Sole Proprietorship
Schedule Analysis Method Part I
Page 7
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Schedule C Sole Proprietorship
Schedule Analysis Method Part I
Page 7
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Schedule C Sole Proprietorship
Schedule Analysis Method Part I
Page 8
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Schedule C
Verify 4562 is for the Schedule C
– Review Page 2 of the worksheet Line #30
Page 13
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Schedule C
Page 14
Business Miles Of 8,109 x 25¢ is $2027.25 In Additional
Depreciation That Could Be Added Back.
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Schedule C
Pages 16 and 17
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Schedule C Sole Proprietorship
Schedule Analysis Method Part I
Page 8
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Schedule C Sole Proprietorship
55Schedule Analysis Method Part I 63
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Schedule D Capital Gains
57Schedule Analysis Method Part I 64
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Schedule D
Schedule Analysis Method Part I
Where Did The $16,544 Loss On Line 6 Come From?
The 1040 Showed a $3,000 Loss
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Schedule D
Schedule Analysis Method Part I
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IRS Form 6252
Installment Sale Income
– If using, obtain:
• Copy of agreement
• Proof of timely receipt
– Principal flows to Form 6252
– Interest portion, if any flows to
Schedule B
• Did you already give credit for the
interest?
Schedule Analysis Method Part I
No Example
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Schedule E Royalty Income
68
.Only Royalty Income is entered on SAM Form, Section VII
– Rental income is calculated separately on a rental income worksheet
Schedule Analysis Method Part I
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Rental Income
:In Your Materials
– Locate Calculator and
Quick Reference
Guide for Rental
Income
– Turn to Schedule E,
Part I, Rentals
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Mortgage Statement/Payment Coupon
:A mortgage statement/payment coupon can verify
– If loan is impounded or escrowed
– What property associated with the mortgage payment
– Current tax and insurance information
– Current HOA dues: most investors want verification PUD, Condo or Coop
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Mortgage Statement/Payment Coupon
For Non-Impounded Loans: Obtain Tax And Insurance Information.
Payment Information Below Is From a Borrower Provided Mortgage
Statement And HOA Coupon.
– Taxes, Insurance and HOA Dues are Impounded
HOA DUES $310
$1990
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Schedule Analysis Method Part I
2017 Schedule E Rental Income
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Schedule Analysis Method Part I
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2017 Schedule E Rental Income
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Schedule Analysis Method Part I
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2017 Schedule E Rental Income
Schedule Analysis Method Part I 77
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Schedule Analysis Method Part I
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2017 Schedule E Rental Income
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Schedule Analysis Method Part I
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2017 Schedule E Rental Income
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Schedule Analysis Method Part I
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2017 Schedule E Rental Income
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Schedule Analysis Method Part I
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2017 Schedule E Rental Income
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Schedule Analysis Method Part I
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2017 Schedule E Rental Income
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2017 Schedule E Rental Income
Enter The Verified Mortgage Payment From The Mortgage Statement And Tax
Bills/Insurance Binders If Non-Escrowed
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2017 Schedule E Rental Income
Negative Net Rental Losses Must Be Included As A Liability
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$-400
Compare “rental income” figure with
loan application (Fannie Mae Form
1003)
– Most systems calculate rental income
from the REO section of the 1003
– Review the 1003 to verify what appears
as rental income/rental loss
– If the number is different, override your
system to reflect the true income/loss
based on the tax returns
2017 Schedule E Rental Income
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.Do not use leases; Use the “Cash Flow” from the property
– Flag the mortgage payment in your system as a rental property lien so that it will
NOT count it in the debt ratio
– You may need to override your REO Section
Net Rental Income
234c Condo Court225,000 180,400 3,500 2,500 875 -400
$2300
R
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LOS Connections
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Schedule Analysis Method Part I
Training Tools and Information
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Training Tools and Information
Schedule Analysis Method Part I 9494
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Additional MI Site Information
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Schedule Analysis Method Part I
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➢ Your Local Genworth
Regional Underwriter
➢ Your Genworth Sales
Representative
Your Genworth Resources
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Schedule Analysis Method Part I
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