Enact Holdings, Inc. · NASDAQ:ACT
Enact — Investor Presentation (April 2021)
72 slides from Enact's investor presentation, April 2021
Slide 1: Calculating Income Part I: Income Documentation and Review
Calculating Income Part I: Income Documentation and Review April 2021 Customer Education Brought to you by: Genworth Customer Development and Process Consulting ©2021 Genworth Financial, Inc. All rights reserved. 0
Slide 2: Recommended Prerequisites
Recommended Prerequisites Understanding Desktop Underwriter®- The Basics Understanding Loan Product Advisor- The Basics https://new.mortgageinsurance.genworth.com/course-catalog Calculating Income 1
Slide 3: Agenda
Agenda What we will cover – General Income Requirements – Documentation Requirements – Fannie Mae – Freddie Mac – Genworth Website – Helpful tools We Are Covering Conventional Guidelines Only In Today’s Session Calculating Income 2
Slide 4: Fannie Mae COVID-19 Updates
Fannie Mae COVID-19 Updates Fannie Mae LL2021-03 https://www.fanniemae.com/here-help-single-family Calculating Income 3
Slide 5: Freddie Mac COVID-19 resources
https://sf.freddiemac.com/about/covid19 Calculating Income 4
Slide 6: 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? False: The definition of self-employment is if an applicant owns 25% • or more of a business. If the borrower meets that definition they are considered self-em
Slide 7: Ability-to-Repay (ATR) Rule
Ability-to-Repay (ATR) Rule Key concepts of the rule: – The creditor must make a reasonable and good faith determination that the consumer has the ability to repay the loan. • Mortgage borrowers must provide ample financial documentation; lenders must verify the documents. • In order to be approved
Slide 8: The Mortgage Application URLA/1003/65
The Mortgage Application URLA/1003/65 Calculating Income 7
Slide 9: Verifying Employment History
Verifying Employment History Two-year history is required on the 1003 for all applicants – Spell out the full, complete business name and address. – Correctly identify type of employment: • Does the borrower receive a W-2 or 1099? • If the borrower owns 25% or more of the business, they are self-emp
Slide 10: Verifying Previous Employment History
Verifying Previous Employment History Calculating Income 9
Slide 11: Verifying Non-Employment Income
Verifying Non-Employment Income Calculating Income 10
Slide 12: 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 13: Employment and Income
Employment and Income What Not to Ask- “How Much Do You Make?” About $50,000 $39,850!! Calculating Income 12
Slide 14: Verifying Employment Income
Verifying Employment Income The Interview- Let’s talk about how you get paid… Do you Receive an Annual Salary? Are you Paid by the Hour? • If yes, what is your hourly rate? • How many hours do you work per week? – Are your hours scheduled or per diem? – Do the amount of hours vary week-to-week? – Do
Slide 15: Fannie Mae Guidelines
Fannie Mae Guidelines Calculating Income 14
Slide 16: Fannie Mae Website
Fannie Mae Website https://singlefamily.fanniemae.com/originating-underwriting Calculating Income 15
Slide 17: Fannie Mae Selling Guide General Income
Fannie Mae Selling Guide General Income Chapter B3-3: Income Assessment B3-3.1-01, General Income Information (12/16/2020) Introduction This topic contains information on employment income, including: Stable and Predictable Income Variable Income Continuity of Income Determining the Need for Federal
Slide 18: Fannie Mae Selling Guide: Stable and Predictable Income
Fannie Mae Selling Guide Stable and Predictable Income Fannie Mae’s underwriting guidelines emphasize the continuity of a borrower’s stable income. The stable and reliable flow of income is a key consideration in mortgage loan underwriting. Individuals who change jobs frequently, but who are neverth
Slide 19: Fannie Mae Selling Guide: Variable Income
Fannie Mae Selling Guide Variable Income All income that is calculated by an averaging method must be reviewed to assess the borrower’s history of receipt, the frequency of payment, and the trending of the amount of income being received. Examples of income of this type include income from hourly wo
Slide 20: Fannie Mae Selling Guide: Trends of Income
Fannie Mae Selling Guide Trends of Income When evaluating variable income, after the monthly year-to-date income amount is calculated, it must be compared to prior years’ earnings using the borrower’s W-2’s or signed federal income tax returns (or a standard Verification of Employment completed by t
Slide 21: Fannie Mae Selling Guide: Continuity of Income
Fannie Mae Selling Guide Continuity of Income A key driver of successful homeownership is confidence that all income used in qualifying the borrower will continue to be received by the borrower for the foreseeable future. Unless the lender has knowledge to the contrary, if the income does not have a
Slide 22: Fannie Mae Selling Guide: Continuity of Income continued
Fannie Mae Selling Guide Continuity of Income continued The following table contains examples of income types with and without defined expiration dates. This information is provided to assist lenders in determining whether additional income documentation may be necessary to support a three-year cont
Slide 23: Documentation Provided by the Borrower
Documentation Provided by the Borrower Calculating Income 22
Slide 24: 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 23
Slide 25: Fannie Mae Selling Guide: Other Sources of Income
Fannie Mae Selling Guide B3-3.1-09, Other Sources of Income (12/16/2020) Calculating Income 24
Slide 26: Freddie Mac Guidelines
Freddie Mac Guidelines Calculating Income 25
Slide 27: General Requirements For Freddie Mac
General Requirements For Freddie Mac https://sf.freddiemac.com/ Calculating Income 26
Slide 28: General Requirements For Freddie Mac
General Requirements For Freddie Mac Calculating Income 27
Slide 29: Employed Income Types
Employed Income Types Primary – Borrower’s primary source of employed income Secondary – Second job, part-time job or multiple jobs Additional – Commissions Primary – Bonus – Overtime Additional – Tips Secondary – Auto allowance – Mortgage differential – Military entitlements – Military Reserves & N
Slide 30: General Requirements For Freddie Mac
General Requirements For Freddie Mac Stable monthly income is the Borrower's verified gross monthly income from all acceptable and verifiable sources that can reasonably be expected to continue for at least the next three years. For each income source used to qualify the Borrower, the Seller must de
Slide 31: Income Continuance Requirements
Income Continuance Requirements In most instances, a two-year history of receiving a consistent level of income is required in order for the income to be considered stable and used for qualifying. While the source of income may vary, the Borrower must have a consistent level of income despite change
Slide 32: Employment Income
Employment Income When a borrower has less than a two-year history of primary employment you may be able to determine the income is stable. However, when the borrower’s income is derived from fluctuating hourly earnings the employment history must be at least 12 months. Examples that may support les
Slide 33: Base Non-fluctuating Employment Earnings
Base Non-fluctuating Employment Earnings Base non-fluctuating earnings may include both salaried and hourly earnings; however, the pay rate and number of hours worked must not fluctuate between pay periods. The income documentation must support base non-fluctuating earnings. Refer to Section 5303.2(
Slide 34: Fluctuating Hourly Employment Earnings
Fluctuating Hourly Employment Earnings 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
Slide 35: Additional Employed Income
Additional Employed Income Certain employment characteristics may require additional documentation and/or analysis. Those employment characteristics include: Full-time and part-time employment Seasonal employment Union members Borrower employed by family member or interested party to the tra
Slide 36: Documentation Review and Requirements
Documentation Review and Requirements Calculating Income 35
Slide 37: 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 38: Verifying the Qualifying Income
Verifying the Qualifying Income A minimum history of two years of employment is recommended. However, in certain circumstances income that has been received for a shorter period of time may be acceptable. Each file is reviewed individually. Base Pay (Salary and Hourly) Obtain the following documents
Slide 39: 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 40: Written Verification of Employment
Written Verification of Employment Pay close attention to- Calculating Income 39
Slide 41: Written VOE -1005
Written VOE -1005 All of the information on Form 1005 must be legible. • The following fields are optional; • #11- Probability • #14- OT & Bonus • #16- Date of next pay increase • #17- Projected amount of next pay increase • #18- Date of last pay increase • #19 Amount of last pay increase • #24- Par
Slide 42: Examining Pay Stubs
Examining Pay Stubs Calculating Income 41
Slide 43: Examining Pay Stubs
Examining 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 not additional documentation must be reviewed. – If paid hourly, the number of hours must be noted on the paystub – Dated within 3
Slide 44: Examining W-2s
Examining W-2s Calculating Income 43
Slide 45: 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 46: Verbal VOE (VVOE) Requirement- Fannie Mae
Verbal VOE (VVOE) Requirement- Fannie Mae Requirements for hourly, salary and commission income • The Lender must independently obtain a phone number and, if possible, the employer’s address. Sources include: • Telephone Book • The Internet • Directory Assistance • The Applicable Licensing Bureau •
Slide 47: Pre-Closing Verification (PCV) Requirement- Freddie Mac
Pre-Closing Verification (PCV)Requirement- Freddie Mac Requirements for hourly, salary and commission income PCV types may include: Verbal (VOE) Written VOE Military Leave and Earning (LES) Third-Party Employment Verification Service An e-mail Exchange from the Employer’s Work e-mail addre
Slide 48: Pre-Closing Verification (PCV) Requirement- Freddie Mac
Pre-Closing Verification (PCV)Requirement- Freddie Mac Now permitted is an e-mail exchange from the independently obtained employer’s work e-mail address that includes, at a minimum, all of the following: Borrower’s name and current employment status Employer’s name Name and title of the indiv
Slide 49: 2020 Tax Format
2020 Tax Format Calculating Income 48
Slide 50: 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 49
Slide 51: IRS 4506-C Fannie Mae
IRS 4506-C Fannie Mae https://www.irs.gov/pub/irs-pdf/f4506c.pdf Calculating Income 50
Slide 52: IRS 4506-C Freddie Mac
IRS 4506-C Freddie Mac Guide impact Section 5501.3 has been updated to reflect these changes. UPDATES TO INTERNAL REVENUE SERVICE (IRS) FORM 4506-T We are updating all references to Internal Revenue Service (IRS) Form 4506-T to reflect the IRS’s revised requirement for IRS Form 4506-C. IRS Form 4506
Slide 53: Calculations
Calculations Always include the calculations in the mortgage file Calculating Income 52
Slide 54: Income Calculation
Income Calculation Annual Salary/ 12 months Weekly- Every Week Weekly Base x 52 / 12 months Bi-Weekly- Every Two Weeks Bi-Weekly Base x 26/ 12 months Bi-Monthly- Twice a Month Bi-Monthly Base x 2 Hourly- Per Hours Worked Hourly Rate x # of Hours Per Week x 52/ 12 months Pier Diem, Commissions, OT… A
Slide 55: Calculating Income Underwriter Math
Underwriter Math , = hr day*+ 2,08 i / ky ay! tlayeck rt : safe J as * sat AVA Calculating Income Genworth = ANS ®
Slide 56: Calculators
Calculators https://new.mi.genworth.com/self- employed-borrower-calculators Calculating Income 55
Slide 57: Genworth Income Calculation Worksheet
Genworth Income Calculation Worksheet https://new.mi.genworth.com/self-employed-borrower-calculators Calculating Income 56
Slide 58: 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 57
Slide 59: Practice Exercise
Practice Exercise Annual: – $60,000 / 12 = $5,000 • Weekly: $3,250 – ($750 x 52) = $39,000 / 12 = • Bi-Weekly: $2,166 – ($1,000 x 26)= $26,000 / 12 = • Semi-Monthly: $2,500 – ($1,250 x 24) =$30000/12 = • Hourly: – Must know how many hours worked per week!!!! – ($20 x 40 x 52) = $41,600 / 12 = $3,467
Slide 60: Resources
Resources Fannie Mae, Freddie Mac and Genworth Calculating Income 59
Slide 61: 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 62: Fannie Mae Job Aids/FAQs
Fannie Mae Job Aids/FAQs https://singlefamily.fanniemae.com/learning-center/originating-and-underwriting Calculating Income 61
Slide 63: Fannie Mae Top Trending Questions
Fannie Mae Top Trending Questions https://singlefamily.fanniemae.com/faq-top-trending-selling-faqs Calculating Income 62
Slide 64: Freddie Mac Documentation Matrix
Freddie Mac Documentation Matrix Documentation Matrix – Assists in underwriting and documenting loans for Freddie Mac – Lenders may have overlays – Check for latest version https://sf.freddiemac.com/content/_assets/resources/pdf/update/docmatrix.pdf Calculating Income 63
Slide 65: Freddie Mac Rental Income Matrix
Freddie Mac Rental Income Matrix Rental Income – Assists in understanding rental income requirements and calculation for Freddie Mac – Check for latest version https://sf.freddiemac.com/content/_assets/resources/pdf/update/rental.pdf Calculating Income 64
Slide 66: Genworth Underwriting Guidelines
Genworth Underwriting Guidelines
Slide 67: Genworth Rate Express
Genworth Rate Express® >» 4% & 800 444.5664 | 4 | Q : Genworth z=. | Mortgage Insurance GE MI MI & RATES ERWRITING & GUIDES | LOS & CONNECTIONS | GENWORTH TOOLKIT | TRAINING | OUR BLOG | ABOUT US Rate Express Rate Cards D-19 updates and resources Genworth Mortgage Insurance GenRATE MI Products About
Slide 68: Training Tools and Information
Training Tools and Information
Slide 69: Training Tools and Information
Training Tools and Information 68
Slide 70: Additional MI Site Information
Additional MI Site Information
Slide 71: Your Genworth Resources
Your Genworth Resources ActionCenter®: 800 444.5664 Your Local Genworth Regional Underwriter Your Genworth Sales Representative
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