This Bulletin has been revised to update the effective date of Fannie Mae and Freddie Mac COVID-19 Temporary Flexibilities which have been extended for certain policies and will expire for others; refer to the highlight below
View current COVID-19 FAQs: Fannie Mae COVID-19 FAQs or Freddie Mac COVID-19 FAQs
Highlights of the information are detailed below.
Effective Date of Temporary Flexibilities Extended
The effective date of the temporary flexibilities due to COVID-19 has been extended for the policies below.
The below temporary policies will remain in place until further notice:
- Verification of income including self-employed documentation
- Age of documents
- Market based assets
Expiring Temporary Flexibilities
The temporary flexibilities will expire for the policies below and standard Fannie Mae/Freddie Mac policy will apply:
- Appraisals including completion reports, new construction, appraisal waivers/ACE offers – Temporary appraisal flexibilities expire as of May 31, 2021. Applications dated on or after June 1, 2021 standard Fannie Mae/Freddie Mac policies will apply
- Power of Attorney – Temporary POA flexibilities expire as of April 30, 2021. Applications dated on or after May 1, 2021 standard Fannie Mae/Freddie Mac policies will apply
- Condo Project Reviews – Temporary condo project flexibilities expire as of April 30, 2021. Applications dated on or after May 1, 2021 standard Fannie Mae/Freddie Mac policies will apply
Furloughed Borrowers
- Furloughed borrower’s income is not eligible under Fannie Mae/Freddie Mac’s temporary leave income policy
- Additionally, the following also applies:
- Furloughed borrowers receiving income for a specified period of time (e.g. one month), do not meet Fannie Mae/Freddie Mac’s requirement for income to be stable, predictable and likely to continue therefore the income is ineligible for qualifying
- In the event a borrower discloses they have been furloughed, even though a verification of employment has indicated the borrower is employed, the loan is ineligible to proceed
Unemployment Benefits
Unemployment benefits may only be used as qualifying income if it is associated with seasonal employment (e.g. agricultural worker, resort worker such as lifeguard, ski instructor, etc.)
Borrowers with Reduced Hours and/or Pay
- If the borrower’s paystub or bank statement reflect reduced pay, the borrower must be qualified on the reduced pay
- If the borrower’s paystubs or bank statements reflect reduced, declining, variable income, the reduced, declining, variable income may be used for qualifying as long as it has stabilized and there is no reason to believe the borrower will not continue to be employed at the current level. The income cannot be averaged over the period of declination
Self-Employed Paycheck Protection Program (PPP) Loan Recipients
- The terms of the PPP loan allow for the potential of all, or some portion, of the loan to be forgiven, therefore any expected loan payment is not included in the DTI calculation or considered in the income calculation (i.e. deducted from income) at this time
- The existence of a PPP loan should be considered when analyzing the borrower’s current business situation and its effect on the flow of income
Self-Employed Borrowers with Businesses Closed Due to COVID-19
As a reminder, if a business is currently not operating, the income cannot be used for qualifying
Deferred Debt Payments
Clarification provided that if any of the borrower’s debt payments (e.g. student loans, auto loans, etc.) have been temporarily suspended due to COVID-19, the payments must be included in the borrower’s DTI when qualifying the borrower
If you have any questions, please contact your Account Executive
References:
- Fannie Mae Lender Letter 2021-04 dated April 21, 2021
- Freddie Mac Bulletin 2021-15 dated April 21, 2021
