Enact Holdings, Inc. · NASDAQ:ACT
Enact — Investor Presentation (February 2020)
71 slides from Enact's investor presentation, February 2020
Slide 1: Calculating Income: Fannie Mae And Freddie Mac Guidelines
Calculating Income: Fannie Mae And Freddie Mac Guidelines February 2020 ©2020 Genworth Financial, Inc. All rights reserved.
Slide 2: Agenda
Agenda What we will cover – General Income Requirements – Documentation Requirements – Fannie Mae – Freddie Mac – Practice Cases – Genworth Website – Helpful tools We Are Covering Conventional Loans Only In Today’s Session Calculating Income 1
Slide 3: Let’s Take A Quiz
Let’s Take A Quiz True or False: W-2 wages are always considered salary income and never self-employed income for Fannie Mae or Freddie Mac? True or False: When calculating income we can always average total • ytd pay and W-2s and enter the total into DU or Loan Product Advisor? See Fannie Mae Selle
Slide 4: Income Requirements
Income Requirements Establish that income is: – Steady, Stable or increasing. – Likely to continue into the future – Must be able to document the income as per investor guidelines (Are they reporting it on their tax returns??) – Income from other Non-Employed Sources such as Child Support, Interest
Slide 5: Income Document Requirements
Income Document Requirements Documentation Requirements – Manual Underwrite: Typically requires two year history to be received and documented – Automated underwriting (Loan Product Advisor® or Desktop Underwriter®): • Typically follow the findings report or feedback certificate • Often documentatio
Slide 6: Resources
Resources To access the Fannie Mae Selling Guide: – Go to http://www.fanniemae.com – Click on “Single Family”, “Originating and Underwriting” and then “Selling Guide” – Chapter B3-3 Income Assessment of the Selling Guide discusses Income Underwriting requirements To access the Freddie Mac Loan Produ
Slide 7: Documenting Employment and Income
Documenting Employment and Income Two Year History is Required on the 1003/URLA for all applicants For Freddie Mac, For A Borrower Who Experienced Recent Employment Gaps (e.g. 30 Days), Although A Letter Of Explanation Is Not Required, The Seller Remains Responsible For Establishing The Employment I
Slide 8: Documenting Employment and Income
Documenting Employment and Income Break Out Income Type For Proper AUS Results Calculating Income 7
Slide 9: IRS Form 4506-t
IRS Form 4506-t www.irs.gov Calculating Income 8
Slide 10: IRS Form 4506-t
IRS Form 4506-t The IRS Form 4506-T – IRS document used to retrieve past federal tax return transcripts, 1065, 1120S, 1120, or W-2 and 1099 transcripts that are on file with the IRS. – Gives permission for a third party to retrieve the tax payer’s data. – Each applicant must sign a separate form
Slide 11: Fannie Mae Guidelines- 4506T
Fannie Mae Guidelines- 4506T B3-3-1.06: Requirements and Uses of IRS Request for Transcript of Tax Return Form 4506-T (07/03/2019) Calculating Income 10
Slide 12: Freddie Mac Guidelines- 4506T
Freddie Mac Guidelines- 4506T All Borrowers, whose income is used to qualify or whose assets are used as a basis for repayment of obligations in accordance with the requirements in Section 5307.1, are required to sign Internal Revenue Service (IRS) Form 4506-T (or an alternate form acceptable to the
Slide 13: Fannie Mae
Fannie Mae Updates, Policies Calculating Income 12
Slide 14: Fannie Mae Selling Guide General Income
Fannie Mae Selling Guide General Income Calculating Income 13
Slide 15: Fannie Mae Selling Guide Variable Income
See B3-3.1-01, General Income Information (08/07/2019) Fannie Mae Selling Guide Variable Income Calculating Income 14
Slide 16: Fannie Mae Selling Guide
Fannie Mae Selling Guide Trends of Income – Verify trends of income before using to qualify for a mortgage – Income used must be likely to continue See B3-3.1-01, General Income Information (08/07/2019) Calculating Income 15
Slide 17: Commission Income and 2106 Expenses
Commission Income and 2106 Expenses Updated Policy For Commission Income & 2106 Expenses – No longer required to obtain tax returns for commission income – Automobile allowance change Calculating Income 16
Slide 18: Commission Income
Commission Income Calculating Income 17
Slide 19: Documentation Provided by the Borrower
Documentation Provided by the Borrower Calculating Income 18
Slide 20: Documentation Base, Bonus Overtime
Documentation Base, Bonus Overtime Calculating Income 19
Slide 21: Fannie Mae Selling Guide
Fannie Mae Selling Guide Highlights – Core principles of prudent underwriting must be followed when considering income for qualifying purposes • Source, amount, history of receipt and likelihood of continued receipt – Income that does not have a defined expiration date (long term disability, interes
Slide 22: Fannie Mae Selling Guide
Fannie Mae Selling Guide Continuance of Income See B3-3.1-01, General Income Information (08/07/2019) Calculating Income 21
Slide 23: Documentation Fannie Mae Selling Guide
Documentation Fannie Mae Selling Guide Check For Investor Overlays For Timing Of Verbal VOE Calculating Income 22
Slide 24: Written Verification of Employment
Written Verification of Employment Pay close attention to- Calculating Income 23
Slide 25: Fannie Mae “Optional” VOE fields
Fannie Mae “Optional” VOE fields Calculating Income 24
Slide 26: Fannie Mae Selling Guide
Fannie Mae Selling Guide Calculating Income 25
Slide 27: Fannie Mae Job Aids/FAQs
Fannie Mae Job Aids/FAQs https://singlefamily.fanniemae.com/learning-center/originating-and-underwriting Avoiding Common Calculating IncomeUnderwriting Errors 26
Slide 28: Fannie Mae Top Trending Questions
Fannie Mae Top Trending Questions https://singlefamily.fanniemae.com/faq-top-trending Avoiding Common Calculating IncomeUnderwriting Errors 27
Slide 29: Freddie Mac
Freddie Mac Bulletins, Documentation and Rental Income Matrix Calculating Income 28
Slide 30: General Requirements For Freddie Mac
General Requirements For Freddie Mac Calculating Income 29
Slide 31: General Requirements For Freddie Mac
General Requirements For Freddie Mac Calculating Income 30
Slide 32: General Requirements For Freddie Mac
General Requirements For Freddie Mac Calculating Income 31
Slide 33: General Requirements For Freddie Mac
General Requirements For Freddie Mac Calculating Income 32
Slide 34: Income Continuance Requirements
Income Continuance Requirements Calculating Income 33
Slide 35: Freddie Mac Documentation Matrix
Freddie Mac Documentation Matrix Documentation Matrix – Assists in underwriting and documenting loans for Freddie Mac – Lenders may have overlays – Check specific program requirements – Updated February 2020 http://freddiemac.com/learn Calculating Income 34
Slide 36: Freddie Mac Monthly Income
Freddie Mac Monthly Income Calculating Income 35
Slide 37: Income Documentation Requirements
Income Documentation Requirements Calculating Income 36
Slide 38: Bulletin 2019-20 & 2020-1
Bulletin 2019-20 & 2020-1 Freddie Mac Bulletin 2019-20 – Revisions to requirements for employed income analysis and calculation effective for loans with Settlement Dates July 2, 2020 and after BUT Sellers are encouraged to implement immediately – See Guide for complete updates Bulletin 2020-1 Calcul
Slide 39: Capacity: Freddie Mac 2019-20
Capacity: Freddie Mac 2019-20 Effective for Mortgages with Settlement Dates on or After July 2, 2020 – Require that when the borrower’s income is derived from fluctuating hourly employment earnings, under no circumstances may the employment history be less than 12 months. – Adding a requirement that
Slide 40: Freddie Mac Income Documentation
Freddie Mac Income Documentation Calculating Income 39
Slide 41: Freddie Mac Rental Income Matrix
Freddie Mac Rental Income Matrix Rental Income – Assists in understanding rental income requirements and calculation for Freddie Mac – Updated December 2019 Calculating Income 40
Slide 42: Genworth Income Calculation Worksheet
Genworth Income Calculation Worksheet https://new.mi.genworth.com/self-employed-borrower-calculators Calculating Income 41
Slide 43: Document Review
Document Review Pay Stubs, W-2s, Written VOEs Calculating Income 42
Slide 44: Base Income Calculation Guidelines
Base Income Calculation Guidelines Fannie Mae Calculating Income 43
Slide 45: Base Income Conversion Exercises
Base Income Conversion Exercises $60,000 $750 $1,000 $1,250 $20/ hour, 40 hours weekly Calculate the monthly income for each pay scenario above. Calculating Income 44
Slide 46: Practice Exercise
Practice Exercise Annual: – $60,000 / 12 = • Weekly: – ($750 x 52) = $39,000 / 12 = • Bi-Weekly: – ($1,000 x 26)= $26,000 / 12 = • Semi-Monthly: – ($1,250 x 24) =$30000/12 = • Hourly: – Must know how many hours worked per week!!!! – ($20 x 40 x 52) = $41,600 / 12 = Calculating Income 45
Slide 47: Pay Stubs
Pay Stubs Reminders: – The borrower’s name and SSN# must be consistent with the application (Spelling, middle initial or a JR or III). – Computer generated? – If paid hourly, the number of hours must be noted on the paystub – Dated within 30 days of application; If stale dated ask applicant for more
Slide 48: Paystub
Paystub Calculating Income 47
Slide 49: Examining W-2s
Examining W-2s W-2 Reminders: – Name and SSN# match application and also the pay stub – Applicant’s address should also match the 1003 and bank statement mailing address – Should be the most recent one or two (if required) – Is the ytd income consistent with monthly income, if not obtain explanation
Slide 50: Examining W-2-Any questions on this W-2?
Examining W-2-Any questions on this W-2? Calculating Income 49
Slide 51: Written Verification of Employment
Written Verification of Employment VOE Reminders: – Independently verify address to which you are sending – Do not put “Attention to” on the form – Forms should be signed, dated with signature and printed name of employer – If faxed, note the origin of the faxed document-Is it coming from the employ
Slide 52: Exercises
Exercises Calculating Income 51
Slide 53: Income Calculation Exercises
Income Calculation Exercises Keep in Mind: Sometimes there are several ways to calculate income! Calculating Income 52
Slide 54: Calculation W2’s & Paystub and 1099
Calculation W2’s & Paystub and 1099 Local Iron Workers Union W2’s from various jobs Income 17 ’18 `19 – W2 $52,399 $61,555 *Y-T-D paystub As of 09-30-19 $59,765 John is unemployed seasonally. What is the qualifying monthly income? Gross Monthly Income Borrower Base Income Self Employed Overtime Bonu
Slide 55: Commission Income Example
Commission Income Example 1003/Loan Application indicates the borrower started his current job August 1, 2017. He has provided a current ytd paystub and his year end paystubs for 2017 and 2018. Please calculate the income and would you need anything additional? Gross Monthly Income Borrower Base Inc
Slide 56: Borrower Started August 1, 2017
Gross Monthly Income Borrower Base Income Self Employed Overtime Bonuses Commissions Dividends/Interest Other Sub Total Net Rental Subject Net Cash Total Borrower Started August 1, 2017 Calculating Income 55
Slide 57: Calculation from W2’s & Paystub
Calculation from W2’s & Paystub - Sam’s current salary is $35,400 ’17 ’18 ’19 W-2 $28,897 $30,250 * See pay stub * YTD pay stub as of 12/15/19 - $33,925 - Sally works as a school nurse and works from Sept 1st- June 30th earning $802 every two weeks. - - She also receives child support for $500 per m
Slide 58: Pay Stub with Prior Year W-2
Pay Stub with Prior Year W-2 Calculating Income 57
Slide 59: Calculation from Tax Returns
Calculation from Tax Returns Eli receives $35,000 in taxable social security income as per his 2018 tax returns. His application states he is 42 years old with no dependents. Calculate the monthly social security income ONLY for Eli. Do you have to do anything special? 0 Calculating Income 58
Slide 60: Calculation from VOE
Calculation from VOE Income ‘17 ‘18 ’19ytd * – Base $50,000 $53,000 $12,500 – Commission $0 $0 $35,000 *Y-T-D-2018 through 6/30/19 – Assume it is currently 6/30/19! Donovan’s pay structure changed 1/1/19 to base plus commission-New Annual Salary is $25000 What is the qualifying monthly income? Base
Slide 61: Fannie Mae Website
Fannie Mae Website http://fanniemae.com/portal/index.html Calculating Income 60
Slide 62: Fannie Mae Selling Guide
Fannie Mae Selling Guide Calculating Income 61
Slide 63: https://sf.freddiemac.com/
https://sf.freddiemac.com/ Calculating Income 62
Slide 64: Genworth Rate Express
Genworth Rate Express® mi.genworth.com Calculating Income 63
Slide 65: Genworth Underwriting Guidelines
Genworth Underwriting Guidelines mi.genworth.com Calculating Income 64
Slide 66: LOS Connections
LOS Connections mi.genworth.com Calculating Income 65
Slide 67: Training Tools and Information
Training Tools and Information mi.genworth.com Calculating Income 66
Slide 68: Training Tools and Information
Training Tools and Information Calculating Income 67
Slide 69: Additional MI Site Information
Additional MI Site Information Calculating Income 68
Slide 70: Your Genworth Resources
Your Genworth Resources ➢ ActionCenter®: 800 444.5664 ➢ Your Local Genworth Regional Underwriter ➢ Your Genworth Sales Representative Calculating Income 69
Slide 71: 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
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