Enact Holdings, Inc. · NASDAQ:ACT
Enact — Investor Presentation (July 2020)
72 slides from Enact's investor presentation, July 2020
Slide 1: Calculating Rental Income
Calculating Rental Income Fannie Mae and Freddie Mac Guidelines July 2020 Customer Education Brought to you by: Genworth Customer Development and Process Consulting ©2020 Genworth Financial, Inc. All rights reserved. 0
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 or for three years – 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
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
Fannie Mae Updates, Policies Calculating Income 10
Slide 12: Fannie Mae Website
Fannie Mae Website https://singlefamily.fanniemae.com/originating-underwriting Calculating Income 11
Slide 13: Fannie Mae Job Aids/FAQs
Fannie Mae Job Aids/FAQs https://singlefamily.fanniemae.com/learning-center/originating-and-underwriting Avoiding Common Calculating IncomeUnderwriting Errors 12
Slide 14: Fannie Mae Top Trending Questions
Fannie Mae Top Trending Questions https://singlefamily.fanniemae.com/faq-top-trending Avoiding Common Calculating IncomeUnderwriting Errors 13
Slide 15: Fannie Mae COVID-19 Updates
Fannie Mae COVID-19 Updates Fannie Mae LL2020-03 updated from original issuance. https://singlefamily.fanniemae.com/media/22316/display 14
Slide 16: Fannie Mae Lender Letter 2020-03
Fannie Mae Lender Letter 2020-03 Continuity of Income*: Effective March 23, 2020 to July 31, 2020 – Verbal VOE • Lenders may obtain a written VOE confirming the borrower’s current employment status within the same timeframe as the verbal VOE requirements. • An email directly from the employer’s work
Slide 17: Fannie Mae Lender Letter 2020-03
Fannie Mae Lender Letter 2020-03 Effective for applications taken April 14 through July 31, 2020 – Age of Documents • For most income and asset documents age requirements is reduced from four months to two months or 60 days from the note date. If an asset statement is issued quarterly, lenders must
Slide 18: Fannie Mae Selling Guide General Income
Fannie Mae Selling Guide General Income Calculating Income 17
Slide 19: 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 18
Slide 20: 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 19
Slide 21: Documentation Base, Bonus Overtime
Documentation Base, Bonus Overtime Calculating Income 20
Slide 22: Commission Income
Commission Income Calculating Income 21
Slide 23: Documentation Provided by the Borrower
Documentation Provided by the Borrower Calculating Income 22
Slide 24: Fannie Mae Selling Guide
Fannie Mae Selling Guide Highlights – Core principles of prudent underwriting should be 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, in
Slide 25: Fannie Mae Selling Guide
Fannie Mae Selling Guide Continuance of Income See B3-3.1-01, General Income Information (08/07/2019) Calculating Income 24
Slide 26: Documentation Fannie Mae Selling Guide
Documentation Fannie Mae Selling Guide See COVID 19 temporary guidelines Check For Investor Overlays For Timing Of Verbal VOE Calculating Income 25
Slide 27: Fannie Mae Selling Guide
Fannie Mae Selling Guide Calculating Income 26
Slide 28: Freddie Mac
Freddie Mac Bulletins, Documentation and Rental Income Matrix Calculating Income 27
Slide 29: Bulletin 2020-5 & 2020-23
Bulletin 2020-5 & 2020-23 The temporary flexibilities are effective immediately for all Mortgages in process and remain in place for Mortgages with Applications Received on or before July 31, 2020. Credit Underwriting: – Employed Income – 10-day pre-closing verification (PCV), Sellers may obtain one
Slide 30: Bulletin 2020-8 & 2020-23
Bulletin 2020-8 & 2020-23 The temporary credit underwriting requirements below are effective for Mortgages with Application Received Dates on or after April 14, 2020, and remain in place for Mortgages with Application Received Dates on or before July 31, 2020; however, Sellers are encouraged to appl
Slide 31: General Requirements For Freddie Mac
General Requirements For Freddie Mac https://sf.freddiemac.com/ 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: General Requirements For Freddie Mac
General Requirements For Freddie Mac Calculating Income 33
Slide 35: Income Continuance Requirements
Income Continuance Requirements See COVID 19 temporary guidelines Calculating Income 34
Slide 36: 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 June 2020 https://sf.freddiemac.com/content/_assets/resources/pdf/update/docmatrix.pdf Calculating Income
Slide 37: Freddie Mac Monthly Income
Freddie Mac Monthly Income Calculating Income 36
Slide 38: Income Documentation Requirements
Income Documentation Requirements Calculating Income 37
Slide 39: 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 Bulletin 2020-1 Calculating Income 38
Slide 40: 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. – Clarifying that “fluctuat
Slide 41: Freddie Mac Income Documentation
Freddie Mac Income Documentation Calculating Income 40
Slide 42: 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 https://sf.freddiemac.com/content/_assets/resources/pdf/update/rental.pdf Calculating Income 41
Slide 43: Genworth Income Calculation Worksheet
Genworth Income Calculation Worksheet https://new.mi.genworth.com/self-employed-borrower-calculators Calculating Income 42
Slide 44: Document Review
Document Review Pay Stubs, W-2s, Written VOEs Calculating Income 43
Slide 45: Base Income Calculation Guidelines
Base Income Calculation Guidelines Fannie Mae Calculating Income 44
Slide 46: 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 45
Slide 47: Pay Stubs
Pay Stubs See COVID 19 temporary guidelines 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
Slide 48: Paystub
Paystub See COVID 19 temporary guidelines YTD 4.06 months $23,626 /4.06 = $5819 Base 42.1904 x 80 x 26 =$87756/12 = $7313 Does she work the full year?? Need prior year W-2 or contract Would not just use the $7313 but probably $5819 is closer to her actual pay Calculating Income 47
Slide 49: Examining W-2s
Examining W-2s W-2 Reminders: – Name and SSN#, if it appears, 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 ob
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 – Use only “Human Resources” or “Payroll” for “Attention to” – Forms should be signed, dated with signature and printed name of employer – If faxed, note the origin of the faxed document-Is it c
Slide 52: Written Verification of Employment
Written Verification of Employment Pay close attention to- Calculating Income 51
Slide 53: Fannie Mae "Optional" VOE fields
Fannie Mae “Optional” VOE fields Calculating Income 52
Slide 54: The Work Number
® The Work Number Employer Name must match exactly as listed on Paystub to get a match – Verify information back to 1003 – Is income broken out? Enter into 1003 if using; Look for trends Calculating Income 53
Slide 55: Exercises
Exercises Calculating Income 54
Slide 56: Income Calculation Exercises
Income Calculation Exercises Keep in Mind: Sometimes there are several ways to calculate income! Calculating Income 55
Slide 57: Calculation W2's & Paystub and 1099
Calculation W2’s & Paystub and 1099 Local Iron Workers Union W2’s from various jobs Income 18 ’19 `2020 – W2 $52,399 $61,555 *Y-T-D paystub As of 09-30-2020 $59,765 John is unemployed seasonally. What is the qualifying monthly income? Gross Monthly Income Borrower Base Income Self Employed Overtime
Slide 58: 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 59: 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 58
Slide 60: 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? How often is our borrower paid? Every
Slide 61: Calculation from W2's & Paystub
Calculation from W2’s & Paystub - Sam’s current salary is $35,400 ’18 ’19 ’2020 W-2 $28,897 $30,250 * See pay stub * YTD pay stub as of 12/15/2020 - $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 p
Slide 62: Pay Stub with Prior Year W-2
Pay Stub with Prior Year W-2 Calculating Income 61
Slide 63: Calculation from Tax Returns
Calculation from Tax Returns Eli receives $35,000 in social security income as per his 2019 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 62
Slide 64: Calculation from VOE
Calculation from VOE Income ‘18 ‘19 ’2020ytd * – Base $50,000 $53,000 $12,500 – Commission $0 $0 $35,000 *Y-T-D- Jan 1 2020 through 6/30/2020 – Assume it is currently 6/30/2020! Donovan’s pay structure changed 1/1/2020 to base plus commission-New Annual Salary is $25000 What is the qualifying monthl
Slide 65: Genworth Underwriting Guidelines
Genworth Underwriting Guidelines Calculating Income 64
Slide 66: Genworth Rate Express
Genworth Rate Express® Calculating Income 65
Slide 67: LOS Connections
LOS Connections Calculating Income 66
Slide 68: Training Tools and Information
Training Tools and Information Calculating Income 67
Slide 69: Training Tools and Information
Training Tools and Information Calculating Income 68
Slide 70: Additional MI Site Information
Additional MI Site Information Calculating Income 69
Slide 71: Your Genworth Resources
Your Genworth Resources ➢ ActionCenter®: 800 444.5664 ➢ Your Local Genworth Regional Underwriter ➢ Your Genworth Sales Representative Calculating Income 70
Slide 72: 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