Enact Holdings, Inc. · NASDAQ:ACT
Enact — Investor Presentation (January 2019)
96 slides from Enact's investor presentation, January 2019
Slide 1: Self-Employed Borrower Freddie Mac Form 91
Self-Employed Borrower Freddie Mac Form 91 Part II, Business Tax Returns January 2019 Genworth Mortgage Insurance Corporation ©2019 Genworth Financial, Inc. All rights reserved.
Slide 2: Lender Responsibility
Lender Responsibility Investors (Fannie Mae, Freddie Mac, Private Investors) require it be determined that self-employed borrowers demonstrate the financial ability to repay the mortgage. – History – Income calculation – Continuance / Stability of income Today’s Session Covers Conventional Loans
Slide 3: Objective
Objective Learn to use the Freddie Mac Income Analysis Form (Form 91) and data from tax returns to calculate supportable self-employed borrower income. – Calculate Partnership Income and Expenses from K-1s and Form 1065 – Calculate S Corp (Sub-Chapter S) Income and Expenses from K-1s and Form 11
Slide 4: Implementation Of Income Requirements
Implementation Of Income Requirements Freddie Mac Form 91 Part II Review 4
Slide 5: 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 September 2018 http://freddiemac.com/learn Freddie Mac Form 91 Part I 5
Slide 6: Freddie Mac Seller/Servicer Guide
Freddie Mac Seller/Servicer Guide Updated and Effective September 19,2018 When Do We Have To Tell Loan Product Advisor Our Borrower Is Self- Employed? Freddie Mac Form 91 Part II Review 6
Slide 7: Freddie Mac Self-Employed Documentation
Freddie Mac Self-Employed Documentation Freddie Mac Form 91 Part II Review 7
Slide 8: Freddie Mac Self-Employed Documentation
Freddie Mac Self-Employed Documentation Freddie Mac Form 91 Part II Review 9
Slide 9: Chapter 5304
Chapter 5304 Freddie Mac Form 91 Part II Review 10
Slide 10: Chapter 5304.1
Chapter 5304.1 5304.1 Stable Monthly Income and Documentation requirements for self-employed borrowers Freddie Mac Form 91 Part II Review 11
Slide 11: 5304 Income NOT On the Personal Returns
5304 Income NOT On the Personal Returns Freddie Mac Form 91 Part II Review 12
Slide 12: Freddie Mac Form 91
Freddie Mac Form 91 Freddie Mac Income Calculation Form 91 Updated August 2017 – Sellers are required to analyze self employed borrowers using Freddie Mac Form 91 or a similar form • Updates include removal of Rental income, 2106 expenses, 4797 and 6252 – The form should be maintained in the loa
Slide 13: Genworth Has Form 91 & 92 Income Calculation Tools Posted To Website
http://www.freddiemac.com/singlefamily/forms/sell/pdf/91.pdf Genworth Has Form 91 & 92 Income Calculation Tools Posted To Website Freddie Mac Form 91 Part II Review 14
Slide 14: new.mi.genworth.com
new.mi.genworth.com Freddie Mac Form 91 Part II Review 15
Slide 15: Training Tools and Information
Training Tools and Information Freddie Mac Form 91 Part II Review 16
Slide 16: Freddie Mac Form 91 Part II Review
Freddie Mac Form 91 Part II Review 17
Slide 17: You’ll Need
You’ll Need Freddie Mac Form 91 Part II Review 21
Slide 18: The Case Study
The Case Study You will be working with John and Mary Homeowner who: – Own 33.33% of an LLC called Street Art Design Company (John) • Reported on a Partnership Return 1065 • John receives a K-1 – Own 100% of an S Corporation called Modern Dwelling Enterprises, Inc. (Mary) • Mary receives a K-1 •
Slide 19: 2018 Forms
2018 Forms Freddie Mac Form 91 Part I 23
Slide 20: In Case Study Part I We Completed Sections 1-7 With The Personal Tax Returns
In Case Study Part I We Completed Sections 1-7 With The Personal Tax Returns Freddie Mac Form 91 Part II Review 24
Slide 21: Calculator and Quick Reference Guide
Calculator and Quick Reference Guide Freddie Mac Form 91 Part II Review 25
Slide 22: 1065 Partnership K-1 Schedule E page 2
1065 Partnership K-1 % Line 1 Ordinary Income/Loss $_________ Line 22 Ordinary Income/Loss $_________ Schedule E page 2 Part II 1040 Line 17 Net Income/Loss Sch.E Taxed at a personal rate $_________ Freddie Mac Form 91 Part II Review 27
Slide 23: Partnerships
Partnerships Check for trends or changes – Gross Receipts – Cost of Good Sold – Gross Profit – Bottom line “Ordinary Income” Page 22 Freddie Mac Form 91 Part II Review 28
Slide 24: 1065 Partnership K-1 Schedule E page 2
1065 Partnership K-1 % Line 1 Ordinary Income/Loss $_________ Line 22 Ordinary Income/Loss $_________ Schedule E page 2 Part II 1040 Line 17 Net Income/Loss Sch.E Taxed at a personal rate $_________ Freddie Mac Form 91 Part II Review 29
Slide 25: Partnership K-1
Partnership K-1 Page 20 Freddie Mac Form 91 Part II Review 30
Slide 26: Rental Income - Partnership or S Corps
Rental Income - Partnership or S Corps No Example Freddie Mac Form 91 Part II Review 31
Slide 27: 1065 Partnership K-1 Schedule E page 2
1065 Partnership K-1 % Line 1 Ordinary Income/Loss $_________ Line 22 Ordinary Income/Loss $_________ Schedule E page 2 Part II 1040 Line 17 Net Income/Loss Sch.E Taxed at a personal rate $_________ Freddie Mac Form 91 Part II Review 33
Slide 28: Schedule E Partnerships and S Corps
Schedule E Partnerships and S Corps Page 12 Freddie Mac Form 91 Part II Review 34
Slide 29: 1065 Partnership K-1 Schedule E page 2
1065 Partnership K-1 % Line 1 Ordinary Income/Loss $_________ Line 22 Ordinary Income/Loss $_________ Schedule E page 2 Part II 1040 Line 17 Net Income/Loss Sch.E Taxed at a personal rate $_________ Freddie Mac Form 91 Part II Review 35
Slide 30: Page 3
Page 3 Freddie Mac Form 91 Part II Review 36
Slide 31: Freddie Mac Seller/Servicer Guide
Freddie Mac Seller/Servicer Guide Freddie Mac Form 91 Part II Review 37
Slide 32: Income NOT On The Personal Tax Returns
Income NOT On The Personal Tax Returns Freddie Mac Still Requires Access To The Income If Income Is Not Reported On The Borrower’s Personal Tax Returns And Income Does NOT Meet The Criteria Above Freddie Mac Form 91 Part II Review 38
Slide 33: Freddie Mac Does Not Have a Written Policy Regarding Distributions
Freddie Mac Does Not Have a Written Policy Regarding Distributions However, Fannie Mae Does - Freddie Mac Form 91 Part II Review 39
Slide 34: Balance Sheet
Balance Sheet Page 26 Freddie Mac Form 91 Part II Review 40
Slide 35: Self-Employed Calculators
Self-Employed Calculators new.mi.genworth.com Freddie Mac Form 91 Part II Review 41
Slide 36: Liquidity
Liquidity Generally Accepted Accounting Principles Freddie Mac Form 91 Part II Review 42
Slide 37: Liquidity-Current Ratio
Liquidity-Current Ratio Generally Accepted Accounting Principles Freddie Mac Form 91 Part II Review 43
Slide 38: Balance Sheet
Balance Sheet Quick Ratio or Acid Test Current Assets : (Cash #1 + Acct Receivable #2 + #4+ #5 +Other Current Assets #6) Current Liabilities: (Acct Pay. #15 + MNB #16 + Other Current Liabilities #17) Current Assets: $765 + 0 + 0 +0+0 = $765 Current Liabilities: $0 + $0+ $3800 = $3800 .201- Solvency
Slide 39: Quick Ratio
Quick Ratio Freddie Mac Form 91 Part II Review 45
Slide 40: Quick Reference Guide
Quick Reference Guide Access: – Form 91 • Quick Reference Guide Section 8 – The Partnership K-1 Page 20 Freddie Mac Form 91 Part II Review 46
Slide 41: Partnership K-1
Partnership K-1 Can We Use Ordinary Income/Rental Income? Not Solvent or Liquid Was There A Distribution? Page 20 Freddie Mac Form 91 Part II Review 47
Slide 42: Quick Reference Guide Partnership K-1
Quick Reference Guide Partnership K-1 Or *$2450 *Try to qualify with $0; To use the $2450 that income must report on the personal returns and: Genworth Calculator Is A Tool; Lenders/Underwriters Review Each Loan File And Determine Compliance With Freddie Mac Or Investor Guidelines Freddie Mac Form 9
Slide 43: Partnership K-1
Partnership K-1 Page 20 Before You Give Credit For The Guarantee Payments Does This Business Appear to Be Viable Of Paying It In The Future? Could We Look At The Balance Sheet Again? Freddie Mac Form 91 Part II Review 49
Slide 44: Balance Sheet
Balance Sheet Could We Verify What Is Included On Line 17? A Possible Line Of Credit Or Business Loan That Get Renewed Each Year? If Yes, We Can Exclude Page 26 Freddie Mac Form 91 Part II Review 50
Slide 45: Liquidity Test Without The Loan
Liquidity Test Without The Loan Do You Feel More Comfortable About Using The Guarantee Payment Now? Freddie Mac Form 91 Part II Review 51
Slide 46: Partnership K-1
Partnership K-1 Page 20 Freddie Mac Form 91 Part II Review 52
Slide 47: Section 8
Section 8 Page 22 Freddie Mac Form 91 Part II Review 53
Slide 48: Partnership Form 1065
Partnership Form 1065 No Example Freddie Mac Form 91 Part II Review 54
Slide 49: Partnership Form 1065
Partnership Form 1065 Page 22 Freddie Mac Form 91 Part II Review 55
Slide 50: Partnership Form 1065
Partnership Form 1065 See Statement Page 22 Freddie Mac Form 91 Part II Review 56
Slide 51: Partnership Form 1065
Partnership Form 1065 Page 28 Freddie Mac Form 91 Part II Review 57
Slide 52: Freddie Mac Form 91 Part II Review
Freddie Mac Form 91 Part II Review 58
Slide 53: Partnership Form 1065
Partnership Form 1065 Page 26 Freddie Mac Form 91 Part II Review 59
Slide 54: Freddie Mac Form 91 Part II Review
Freddie Mac Form 91 Part II Review 60
Slide 55: Partnership Form 1065
Partnership Form 1065 Page 22 Freddie Mac Form 91 Part II Review 61
Slide 56: Partnership Form 1065
Partnership Form 1065 Page 26 Freddie Mac Form 91 Part II Review 62
Slide 57: Partnership K-1
Partnership K-1 This Is Without The Use Of The $2450 Freddie Mac Form 91 Part II Review 63
Slide 58: Assume Loan Product Advisor Only Required One Year Tax Return
Assume Loan Product Advisor Only Required One Year Tax Return Freddie Mac Form 91 Part II Review 64
Slide 59: K1 1120S S Corp Schedule E page 2
1120S S Corp K1 % Line 1 Ordinary Income/Loss $_________ Line 21 Ordinary Income/Loss $_________ Schedule E page 2 Part II 1040 Line 17 Net Income/Loss Sch.E Taxed at a personal rate $_________ Freddie Mac Form 91 Part II Review 66
Slide 60: S Corps
S Corps Check for trends or changes – Gross receipts – Cost of goods sold – Gross profit – Bottom line “Ordinary Income” – Were W-2 wages paid to borrower? Page 33 Freddie Mac Form 91 Part II Review 67
Slide 61: S Corps
S Corps Review for W-2 paid from business – Is this salary income or self employed income? – Did we give credit for this income already? Page 1 Freddie Mac Form 91 Part II Review 68
Slide 62: K1 1120S S Corp Schedule E page 2
1120S S Corp K1 % Line 1 Ordinary Income/Loss $_________ Line 21 Ordinary Income/Loss $_________ Schedule E page 2 Part II 1040 Line 17 Net Income/Loss Sch.E Taxed at a personal rate $_________ Freddie Mac Form 91 Part II Review 69
Slide 63: S Corp K-1
S Corp K-1 Did Mary Get A Distribution? Page 31 Freddie Mac Form 91 Part II Review 70
Slide 64: Page 2 of K-1 and Page 3 of Form 1120S
Page 2 of K-1 and Page 3 of Form 1120S Page 32 Freddie Mac Form 91 Part II Review 71
Slide 65: S Corp K-1
S Corp K-1 Did Mary Get a Distribution? Page 37 Page 31 Freddie Mac Form 91 Part II Review 72
Slide 66: 1120S S Corp K-1 Schedule E page 2
1120S S Corp K-1 % Line 1 Ordinary Income/Loss $_________ Line 21 Ordinary Income/Loss $_________ Schedule E page 2 Part II 1040 Line 17 Net Income/Loss Sch.E Taxed at a personal rate $_________ Freddie Mac Form 91 Part II Review 73
Slide 67: Schedule E Partnerships and S Corps
Schedule E Partnerships and S Corps Page 12 Freddie Mac Form 91 Part II Review 74
Slide 68: K-1 1120S S Corp Schedule E page 2
1120S S Corp K-1 % Line 1 Ordinary Income/Loss $_________ Line 21 Ordinary Income/Loss $_________ Schedule E page 2 Part II 1040 Line 17 Net Income/Loss Sch.E Taxed at a personal rate $_________ Freddie Mac Form 91 Part II Review 75
Slide 69: Page 3
Page 3 Freddie Mac Form 91 Part II Review 76
Slide 70: Freddie Mac Does Not Have a Written Policy Regarding Distributions
Freddie Mac Does Not Have a Written Policy Regarding Distributions However, Fannie Mae Does - Freddie Mac Form 91 Part II Review 77
Slide 71: Liquidity
Liquidity Generally Accepted Accounting Principles Freddie Mac Form 91 Part II Review 78
Slide 72: Liquidity-Current Ratio
Liquidity-Current Ratio Generally Accepted Accounting Principles Freddie Mac Form 91 Part II Review 79
Slide 73: Balance Sheet
Balance Sheet Page 36 Freddie Mac Form 91 Part II Review 80
Slide 74: Balance Sheet
Balance Sheet Quick Ratio or Acid Test Current Assets : (Cash #1 + Acct Receivable #2 + #4+ #5 +Other Current Assets #6) Current Liabilities: (Acct Pay. #15 + MNB #16 + Other Current Liabilities #17) Current Assets: $6,530 + 0 + 0 +0+$5,578 = $12,108 Current Liabilities: $146,222 + $0+ $124,347 = $2
Slide 75: Quick Ratio
Quick Ratio Freddie Mac Form 91 Part II Review 82
Slide 76: S Corp K-1
S Corp K-1 Let’s Put Numbers On Our Tool! Page 31 Freddie Mac Form 91 Part II Review 83
Slide 77: S Corp K-1
S Corp K-1 Let’s Put Numbers On Our Tool! Page 31 Freddie Mac Form 91 Part II Review 84
Slide 78: S Corporation Form 1120S
S Corporation Form 1120S Page 33 Freddie Mac Form 91 Part II Review 85
Slide 79: Rental Income - Partnership or S Corps
Rental Income - Partnership or S Corps No Example Freddie Mac Form 91 Part II Review 86
Slide 80: S Corporation Form 1120S
S Corporation Form 1120S Page 33 Freddie Mac Form 91 Part II Review 87
Slide 81: S Corporation Form 1120S
S Corporation Form 1120S Page 33 Freddie Mac Form 91 Part II Review 88
Slide 82: 1120S Statement
1120S Statement Freddie Mac Form 91 Part II Review 89
Slide 83: S Corporation Form 1120S
S Corporation Form 1120S Page 33 Freddie Mac Form 91 Part II Review 90
Slide 84: S Corporation Form 1120S
S Corporation Form 1120S Page 36 Freddie Mac Form 91 Part II Review 91
Slide 85: S Corporation Form 1120S
S Corporation Form 1120S Page 33 Freddie Mac Form 91 Part II Review 92
Slide 86: S Corporation Form 1120S
S Corporation Form 1120S Page 37 Freddie Mac Form 91 Part II Review 93
Slide 87: S Corp K-1
S Corp K-1 How Much Does John Own? Page 31 Freddie Mac Form 91 Part II Review 94
Slide 88: S Corporation Form 1120S
S Corporation Form 1120S We Must Subtract This Amount/Adjustment From The Qualifying Income Which Was The W-2 Wages Paid From The Business Freddie Mac Form 91 Part II Review 95
Slide 89: Totals
Totals Freddie Mac Form 91 Part II Review 96
Slide 90: This is Mary’s Primary Source of Income and NOT her second job/business
This is Mary’s Primary Source of Income and NOT her second job/business With The Knowledge Of The Distress Of This Business Does It Make Sense To Use Any Income From This Business? Does It Appear Any Of It Is Likely To Continue? Freddie Mac Form 91 Part II Review 97
Slide 91: LOS Connections
LOS Connections Freddie Mac Form 91 Part II Review 10 0
Slide 92: Training Tools and Information
Training Tools and Information Freddie Mac Form 91 Part II Review 101
Slide 93: Training Tools and Information
Training Tools and Information Freddie Mac Form 91 Part II Review 102 10 2
Slide 94: Additional MI Site Information
Additional MI Site Information Freddie Mac Form 91 Part I 10 3
Slide 95: Your Genworth Resources
Your Genworth Resources ➢ ActionCenter®: 800 444.5664 ➢ Your Local Genworth Regional Underwriter ➢ Your Genworth Sales Representative Freddie Mac Form 91 Part II Review 104
Slide 96: 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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