Announcement 2019-017 addressing the Conventional updates.
NewRez will align with the investors' requirements below, effective immediately. The changes to commission income and unreimbursed employee expenses are as a result of the recent changes made by the IRS that are effective with the reporting of 2018 federal income taxes. Please note that no update to the actual product profile is being made.
All commission income will now be treated the same, regardless of the percentage of income. Individual tax returns or IRS Form 2106 will no longer be required. The AUS messages reflecting these changes will be updated in future or LPA releases.
Income validation service:
- DU scored: Until the DU validation service is updated, lenders must continue to obtain a tax transcript for borrowers with commission income that is 25% or more of employment income to be eligible for income validation.
- LPA scored: Effective for submissions and resubmissions on and after March 24, 2019, all commission income, regardless of its percentage of total income, will also be eligible for automated income assessment.
FNMA now aligns with FHLMC and allows the full amount of the automobile allowance to be included as income and the lease or financing expenditure must be included and the lease or financing expenditure must be included as a debt in the calculation of the debt-to-income (DTI) ratio. (Note that a history of receipt of this income continues to be required.) IRS Form 2106 will no longer be required.
rental income for lpa scored loans
For LPA scored loans, new rental income requirements are effective for settlement dates on or after March 1, 2019. These requirements include:
- The Borrower must own a Primary Residence to use rental income to qualify when purchasing a new rental property; and
- Whether purchasing a new rental property or converting a Primary Residence to a rental property, if the Borrower does not have a minimum of one-year investment property management experience:
- The rental income can only offset the principal, interest, taxes, and insurance (PITI) of the rental property; and
- Rental income exceeding the PITI cannot be added to the Borrower's gross monthly income to qualify
Additionally, the borrower's most recent federal income tax return will be required, instead of the most recent two years' returns. Rental income must be annualized unless the Mortgage file documents that the property was renovated or purchased late in the prior calendar year.
du scored cash-out refinance
For loans scored through DU Version 10.3, cash-out refinances with a DTI exceeding 45% will require six months of reserves.