Enact Holdings, Inc. · NASDAQ:ACT
Enact — Investor Presentation (November 2020)
103 slides from Enact's investor presentation, November 2020
Slide 1: Self-Employed Borrower: Form 1084 Part I – The Personal Tax Returns
Self-Employed Borrower: Form 1084 Part I – The Personal Tax Returns November 2020 Customer Education Brought to you by: Genworth Customer Development and Process Consulting ©2020 Genworth Financial, Inc. All rights reserved. 0
Slide 2: Lender Responsibility
Lender Responsibility Investors (Fannie Mae, Freddie Mac, Private Investors) require it to be determined that self-employed borrowers demonstrate the financial ability to repay the mortgage. – History – Income calculation – Continuance / Stability of income Fannie Mae Cash Flow Analysis Form 1084 1
Slide 3: Objective
Objective Learn to use the Fannie Mae Cash Flow Analysis (Form 1084) and data from tax returns to calculate supportable self-employed borrower income. – W-2 wages from a business owned by the borrower – Income from a Schedule C (Sole Proprietor) – Consideration of Capital Gains & Losses Schedule D –
Slide 4: Self-Employment Fannie Mae
Self-Employment Fannie Mae https://www.fanniemae.com/content/guide/selling/b3/3.2/01.html Fannie Mae Cash Flow Analysis Form 1084 3
Slide 5: Self-Employment Fannie Mae
Self-Employment Fannie Mae https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/#Overview Fannie Mae 2020 Selling Guide B3-3.2-01, Underwriting Factors and Documentation for a Self-Employed Borrower (12/04/2018) Fannie Mae Cash Flow Analysis Form 1084 4
Slide 6: Self-Employment Fannie Mae
Self-Employment Fannie Mae https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/#Overview Fannie Mae 2020 Selling Guide B3-3.2-01, Underwriting Factors and Documentation for a Self-Employed Borrower (12/04/2018) Fannie Mae Cash Flow Analysis Form 1084 5
Slide 7: Self-Employment Fannie Mae
Self-Employment Fannie Mae https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/#Overview Fannie Mae 2020 Selling Guide B3-3.2-01, Underwriting Factors and Documentation for a Self-Employed Borrower (12/04/2018) Fannie Mae Cash Flow Analysis Form 1084 7
Slide 8: Fannie Mae COVID-19 Resources
Fannie Mae COVID-19 Resources Fannie Mae Updates, FAQs, Fannie Mae’s COVID 19 webpage https://singlefamily.fanniemae.com/originating-underwriting#selling-promo Fannie Mae Cash Flow Analysis Form 1084 8
Slide 9: Lender Letter LL-2020-03
Lender Letter LL-2020-03 Policy For SEB Extended To November 30, 2020 Income: Updated to business 20 days Fannie Mae Cash Flow Analysis Form 1084 9
Slide 10: Fannie Mae LL-2020-03 Effective June 11, 2020 And Remains Effective Until Further Notice
Fannie Mae LL-2020-03 Effective June 11, 2020 And Remains Effective Until Further Notice Due to the pandemic’s continuing impact on businesses throughout the country, lenders are now required to obtain the following additional documentation to support the decision that the self-employed income meets
Slide 11: Fannie Mae LL-2020-03 Effective June 11, 2020 And Remains Effective Until Further Notice
Fannie Mae LL-2020-03 Effective June 11, 2020 And Remains Effective Until Further Notice Lenders must review the profit and loss statement, and business depository accounts, if required, and other relevant factors to determine the extent to which a business has been impacted by COVID-19. LL- 2020-03
Slide 12: Fannie Mae Cash Flow Analysis Form 1084
Fannie Mae Cash Flow Analysis Form 1084 12
Slide 13: Business Income Calculation Adjustment
Business Income Calculation Adjustment LL-2020-03 Fannie Mae Cash Flow Analysis Form 1084 13
Slide 14: COVID-19 Tools and Resources
COVID-19 Tools and Resources https://new.mi.genworth.com/training/course/COVID-19-Self-Employed-Borrower-Updates https://new.mi.genworth.com/training/course/how-use-business-stability-and-income-calculator Fannie Mae Cash Flow Analysis Form 1084 14
Slide 15: Lender Letter 2020-03
Lender Letter 2020-03 Policy For SEB Extended To July 31, 2020 Income: Fannie Mae Cash Flow Analysis Form 1084 15
Slide 16: Fannie Mae LL-2020-03 Effective June 11, 2020 And Remains Effective Until Further Notice
Fannie Mae LL-2020-03 Effective June 11, 2020 And Remains Effective Until Further Notice Due to the pandemic’s continuing impact on businesses throughout the country, lenders are now required to obtain the following additional documentation to support the decision that the self-employed income meets
Slide 17: Fannie Mae LL-2020-03 Effective June 11, 2020 And Remains Effective Until Further Notice
Fannie Mae LL-2020-03 Effective June 11, 2020 And Remains Effective Until Further Notice Lenders must review the profit and loss statement, and business depository accounts, if required, and other relevant factors to determine the extent to which a business has been impacted by COVID-19. LL- 2020-03
Slide 18: Fannie Mae Cash Flow Analysis Form 1084
Fannie Mae Cash Flow Analysis Form 1084 18
Slide 19: Business Income Calculation Adjustment
Business Income Calculation Adjustment LL-2020-03 Fannie Mae Cash Flow Analysis Form 1084 19
Slide 20: Profit and Loss Statements
Profit and Loss Statements Fannie Mae Cash Flow Analysis Form 1084 20
Slide 21: Fannie Mae COVID-19 Resources
Fannie Mae COVID-19 Resources Fannie Mae Updates, FAQs, Fannie Mae’s COVID 19 webpage https://singlefamily.fanniemae.com/originating-underwriting#selling-promo Fannie Mae Cash Flow Analysis Form 1084 21
Slide 22: Does Borrower Own 25% Or More Of A Business?
Does Borrower Own 25% Or More Of A Business? Can checking the Self-Employed Indicator to “Yes” increase the risk of the loan when evaluated by DU? No Yes Fannie Mae Cash Flow Analysis Form 1084 22
Slide 23: Training Tools and Information
Training Tools and Information Fannie Mae Cash Flow Analysis Form 1084 23
Slide 24: Training Tools and Information
Training Tools and Information Fannie Mae Cash Flow Analysis Form 1084 24
Slide 25: Fannie Mae’s 1084
Fannie Mae’s 1084 https://new- https://singlefamily.fanniemae.com/media/7746/ content.mortgageinsurance.genworth.com/documents/c display alculators/8608510.Training.CashFlow.WEB.0220.pdf Fannie Mae Cash Flow Analysis Form 1084 25
Slide 26: You’ll Need
You’ll Need Fannie Mae Cash Flow Analysis Form 1084 26
Slide 27: The Case Study
The Case Study You will be working with John and Mary Homeowner who: – Own a Schedule C business called Impressive Images (John) – Have Schedule B interest and dividend income – Have capital gains/loss activity reported on a Schedule D – Own an existing rental property shown on a Schedule E – *Own 9
Slide 28: Form 1040
Form 1040 Review for: – Identifiers • Name • Address • Social Security Number – All pages and schedules • Line 2b & 3b ≥ $1,500 - Schedule B • Line 6- Schedule D • Line 7a- Schedule 1 • Line 9- Schedule A? Page 2 Fannie Mae Cash Flow Analysis Form 1084 28
Slide 29: Does Your Borrower Have Additional Sources Income?
Does Your Borrower Have Additional Sources Income? Review Schedule 1 line 5 for Schedule e activity Is it rental or partnership or S Corp or both?? Verify you have the K-1s if applicable Page 4 Fannie Mae Cash Flow Analysis Form 1084 29
Slide 30: Calculator and Quick Reference Guide
Calculator and Quick Reference Guide Access Your Quick Reference Guide 1084 Form and Case Study Fannie Mae Cash Flow Analysis Form 1084 30
Slide 31: Form 1040
Form 1040 Review for: – Wages are reported on line 1 but this could be from multiple sources or for different borrowers – You must review the actual W-2s Page 2 Fannie Mae Cash Flow Analysis Form 1084 31
Slide 32: Do Our Applicants Have Ownership?
Do Our Applicants Have Ownership? Is this W-2 wage for Self-Employed or Salary income? Page 1 Fannie Mae Cash Flow Analysis Form 1084 32
Slide 33: Form 1040
Form 1040 Review for: – Is there an Entry on Line 7a? • Review Schedule 1 Page 2 Fannie Mae Cash Flow Analysis Form 1084 33
Slide 34: Does Your Borrower Have Additional Sources Income?
Does Your Borrower Have Additional Sources Income? Review Schedule 1 Alimony Sole Proprietorship income Rental Income Partnerships S Corps Farm Income Other Income Page 4 Fannie Mae Cash Flow Analysis Form 1084 34
Slide 35: Schedule E Has Two Parts
Schedule E Has Two Parts Page 12 Fannie Mae Cash Flow Analysis Form 1084 35
Slide 36: Schedule E Partnerships and S Corps
Schedule E Partnerships and S Corps Page 13 Fannie Mae Cash Flow Analysis Form 1084 36
Slide 37: S Corp K-1
S Corp K-1 Page 27 Fannie Mae Cash Flow Analysis Form 1084 37
Slide 38: Any Other W-2 Wages?
Any Other W-2 Wages? Review Form 1040, Line 7 for any additional W-2 Wages – Review all W-2’s filed – Determine if applicant owns 25% or more of the business • If yes, it is considered self-employed income • If no, calculate that income on a different form or separately * *Use of the W-2 wages is su
Slide 39: Schedule E to Validate Ownership
Schedule E to Validate Ownership Don’t forget to ask for both K-1’s. Who has ownership in Rehab Addict, LLC? Fannie Mae Cash Flow Analysis Form 1084 39
Slide 40: Partnership K-1
Partnership K-1 Mary is 95% owner Page 20 Fannie Mae Cash Flow Analysis Form 1084 40
Slide 41: Interest Income From S Corps/Partnerships
Interest Income From S Corps/Partnerships Page 6 All Dividend And Interest Income Appears On 1040 Lines 2b And 3b Review Schedule B For Specific Sources, Before Using To Qualify Fannie Mae Cash Flow Analysis Form 1084 41
Slide 42: Interest and Dividends
Interest and Dividends Don’t use unless needed for qualifying – Two year history of stable receipt and likelihood of continuance required – Only use when earned from assets owned by “a business only” – Typically will say “From K-1” or from the business the borrower owns – Check investor overlays bef
Slide 43: Schedule C
Schedule C Page 9 Fannie Mae Cash Flow Analysis Form 1084 43
Slide 44: Is There a Schedule C?
Is There a Schedule C? Check for multiple Schedule C’s… Page 4, 9 Fannie Mae Cash Flow Analysis Form 1084 44
Slide 45: Schedule C
Schedule C Page 9 Fannie Mae Cash Flow Analysis Form 1084 45
Slide 46: Schedule C
Schedule C Page 9 Fannie Mae Cash Flow Analysis Form 1084 46
Slide 47: Schedule C
Schedule C Page 9 Fannie Mae Cash Flow Analysis Form 1084 47
Slide 48: Schedule C
Schedule C Fannie Mae Cash Flow Analysis Form 1084 48
Slide 49: Schedule C
Schedule C Page 9 Fannie Mae Cash Flow Analysis Form 1084 49
Slide 50: Schedule C
Schedule C Page 9 Fannie Mae Cash Flow Analysis Form 1084 50
Slide 51: Schedule C
Schedule C Page 9 Fannie Mae Cash Flow Analysis Form 1084 51
Slide 52: Schedule C
Schedule C Fannie Mae Cash Flow Analysis Form 1084 52
Slide 53: Schedule C
Schedule C Page 9 Fannie Mae Cash Flow Analysis Form 1084 53
Slide 54: Schedule C
Schedule C Fannie Mae Cash Flow Analysis Form 1084 54
Slide 55: Schedule C
Schedule C Page 9 Fannie Mae Cash Flow Analysis Form 1084 55
Slide 56: Schedule C
Schedule C Fannie Mae Cash Flow Analysis Form 1084 56
Slide 57: Schedule C
Schedule C Only the $1,200 Amortization and Casualty Loss of $1,755 is added back. Page 10 Fannie Mae Cash Flow Analysis Form 1084 57
Slide 58: Schedule C
Schedule C Fannie Mae Cash Flow Analysis Form 1084 58
Slide 59: Schedule C Line 9 - Car and Truck Expenses
Schedule C Line 9 - Car and Truck Expenses Use This Depreciation Adjustment Option Only When Investor Policy Allows And The Adjustment Is Needed To Qualify Fannie Mae Cash Flow Analysis Form 1084 59
Slide 60: Schedule C
Schedule C Additional depreciation can be found by multiplying business miles on 44a x IRS depreciation factor for that year. Page 10 Fannie Mae Cash Flow Analysis Form 1084 60
Slide 61: Schedule C
Schedule C Use This Depreciation Option Only When Investor Policy Allows And The Adjustment Is Needed To Qualify Fannie Mae Cash Flow Analysis Form 1084 61
Slide 62: Schedule C
Schedule C Verify 4562 is for the Schedule C – Review Page 2 of the worksheet Line #30 Page 16 Fannie Mae Cash Flow Analysis Form 1084 62
Slide 63: Schedule C
Schedule C Page 17 Business Miles Of 7,554 x 26¢ Is $1,964 In Additional Depreciation That Could Be Added Back. Fannie Mae Cash Flow Analysis Form 1084 63
Slide 64: Schedule C
Schedule C Fannie Mae Cash Flow Analysis Form 1084 64
Slide 65: Schedule C
Schedule C Pages 18 and 19 Fannie Mae Cash Flow Analysis Form 1084 65
Slide 66: IRS Publication 463
IRS Publication 463 Fannie Mae Cash Flow Analysis Form 1084 66
Slide 67: Personal Debt Paid by Business
Personal Debt Paid by Business https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart-B3-Underwriting- Borrowers/Chapter-B3-3-Income-Assessment/Section-B3-3-1-Employment-and-Other-Sources-of- Income/1736864541/B3-3-1-07-Verbal-Verification-of-Employment-10-02-2018.htm Fan
Slide 68: Schedule D Capital Gains
Schedule D Capital Gains Don’t use unless needed for qualifying – Two year history, stable receipt and likely to continue – Check investor overlays before using – Let’s review IRS Form 1040, Line 13 to see what was reported – Our 2019 example show $3,000 loss Pages 2 and 11 Fannie Mae Cash Flow Anal
Slide 69: Schedule D
Schedule D Page 11 Where Did The $10,544 Loss On Line 6 Come From? The 1040 Showed A $3,000 Loss. Fannie Mae Cash Flow Analysis Form 1084 69
Slide 70: Schedule D
Schedule D Page 12 Fannie Mae Cash Flow Analysis Form 1084 70
Slide 71: Fannie Mae Form 1038
Fannie Mae Form 1038 https://singlefamily.fanniemae.com/search#q=form%201038&sort=relevancy&f:@tags=[single%20family] Fannie Mae Cash Flow Analysis Form 1084 71
Slide 72: Genworth Rental Income Calculator
Genworth Rental Income Calculator – Locate Calculator and Quick Reference Guide for Rental Income – Turn to Schedule E, Part I, Rentals – Rental Income has been removed from the 1084 Form Page 13 Fannie Mae Cash Flow Analysis Form 1084 72
Slide 73: Mortgage Statement/Payment Coupon
Mortgage Statement/Payment Coupon A mortgage statement/payment coupon can verify: – If loan is impounded or escrowed – What property is associated with the mortgage payment – Current tax and insurance information – Current HOA dues: most investors want verification PUD, Condo or Coop PITI $1,637 (ve
Slide 74: Fannie Mae Cash Flow Analysis Form 1084
Fannie Mae Cash Flow Analysis Form 1084 74
Slide 75: Page 13
Page 13 Fannie Mae Cash Flow Analysis Form 1084 75
Slide 76: 2019 Schedule E Rental Income
2019 Schedule E Rental Income Fannie Mae Cash Flow Analysis Form 1084 76
Slide 77: Page 13
Page 13 Fannie Mae Cash Flow Analysis Form 1084 77
Slide 78: 2019 Schedule E Rental Income
2019 Schedule E Rental Income Fannie Mae Cash Flow Analysis Form 1084 78
Slide 79: Page 13
Page 13 Fannie Mae Cash Flow Analysis Form 1084 79
Slide 80: 2019 Schedule E Rental Income
2019 Schedule E Rental Income Fannie Mae Cash Flow Analysis Form 1084 80
Slide 81: Page 13
Page 13 Fannie Mae Cash Flow Analysis Form 1084 81
Slide 82: 2019 Schedule E Rental Income
2019 Schedule E Rental Income Fannie Mae Cash Flow Analysis Form 1084 82
Slide 83: Page 13
Page 13 Fannie Mae Cash Flow Analysis Form 1084 83
Slide 84: 2019 Schedule E Rental Income
2019 Schedule E Rental Income Fannie Mae Cash Flow Analysis Form 1084 84
Slide 85: Page 13
Page 13 Fannie Mae Cash Flow Analysis Form 1084 85
Slide 86: 2019 Schedule E Rental Income
2019 Schedule E Rental Income Fannie Mae Cash Flow Analysis Form 1084 86
Slide 87: Page 13
Page 13 Fannie Mae Cash Flow Analysis Form 1084 87
Slide 88: 2019 Schedule E Rental Income
2019 Schedule E Rental Income Fannie Mae Cash Flow Analysis Form 1084 88
Slide 89: Page 13
Page 13 Fannie Mae Cash Flow Analysis Form 1084 89
Slide 90: 2019 Schedule E Rental Income
2019 Schedule E Rental Income Fannie Mae Cash Flow Analysis Form 1084 90
Slide 91: 2019 Schedule E Rental Income
2019 Schedule E Rental Income Fannie Mae Cash Flow Analysis Form 1084 91
Slide 92: Mortgage Statement/Payment Coupon
Mortgage Statement/Payment Coupon A mortgage statement/payment coupon can verify: – If loan is impounded or escrowed – What property is associated with the mortgage payment – Current tax and insurance information – Current HOA dues: most investors want verification PUD, Condo or Coop PITI $1,637 (ve
Slide 93: 2019 Schedule E Rental Income
2019 Schedule E Rental Income Fannie Mae Cash Flow Analysis Form 1084 93
Slide 94: URLA Rental Property
URLA Rental Property PITI $1,637 (verified on mortgage statement) + $265 (verified HOA) = $1,902 Fannie Mae Cash Flow Analysis Form 1084 94
Slide 95: Net Rental Income
Net Rental Income 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 th
Slide 96: Genworth Underwriting Guidelines
Genworth Underwriting Guidelines Fannie Mae Cash Flow Analysis Form 1084 96
Slide 97: Genworth Rate Express®
Genworth Rate Express® Fannie Mae Cash Flow Analysis Form 1084 97
Slide 98: LOS Connections
LOS Connections Fannie Mae Cash Flow Analysis Form 1084 98
Slide 99: Training Tools and Information
Training Tools and Information Fannie Mae Cash Flow Analysis Form 1084 99
Slide 100: Training Tools and Information
Training Tools and Information Fannie Mae Cash Flow Analysis Form 1084 10 0
Slide 101: Additional MI Site Information
Additional MI Site Information Fannie Mae Cash Flow Analysis Form 1084 10 1
Slide 102: Your Genworth Resources
Your Genworth Resources ➢ ActionCenter®: 800 444.5664 ➢ Your Local Genworth Regional Underwriter ➢ Your Genworth Sales Representative Fannie Mae Cash Flow Analysis Form 1084 10 2
Slide 103: Legal Disclaimer
Legal Disclaimer Genworth Mortgage Insurance is happy to provide you with these training materials. While we strive for accuracy, we also know that any discussion of laws and their application to particular facts is subject to individual interpretation, change, and other uncertainties. Our train
Enact Holdings — Investor Presentation (November 2020) on 6ix