Genworth Mortgage Insurance Corporation ©2018 Genworth Financial, Inc. All rights reserved. Self-Employed Borrower Fannie Mae Cash Flow Form 1084 Part I Personal Tax Returns January 2018
Genworth Mortgage Insurance Corporation ©2018 Genworth Financial, Inc. All rights reserved.
Self-Employed Borrower
Fannie Mae Cash Flow Form 1084 Part IPersonal Tax Returns
January 2018
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
Lender Responsibility
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Self-Employed Calculators
Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
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Self-Employment Fannie Mae
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Self-Employment Fannie Mae
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When Is a An Analysis of Income Required?
Fannie Mae 2016 Selling Guide B3-3.2-01, Underwriting Factors and
Documentation for a Self-Employed Borrower (10/24/2016)
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Written Analysis of Income-Fannie Mae
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Fannie Mae 2016 Selling Guide B3-3.2-01, Underwriting Factors and
Documentation for a Self-Employed Borrower (10/24/2016)
Can checking the Self Employed Indicator to “Yes”
increase the risk of the loan when evaluated by DU?
YesNo
Does Borrower Own 25% Or More Of A Business?
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You’ll Need
17Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
The Case Study
:You will be working with John and Mary Homeowner who
– Own a Schedule C business called Red Carpet Security (John)
– Have interest income earned from a partnership and personal assets
– Have capital gains/loss activity reported on a Schedule D
– Own an existing rental property shown on a Schedule E
– Own 50% of an LLC called MHI (Mary)
• Reported on a Partnership Return Form 1065
• Mary receives a K-1
– Own 100% of an S Corporation called Always Watching Security, Inc. (John)
• John receives a K-1
• John receives a W-2 Wage Statement from the business
• Receives an 1120S Business Tax Return
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:Review for
– Identifiers
• Name
• Address
• Social Security Number
– All pages and schedules
– Any Red Flags
– Date
• Most recent
– Signatures
Form 1040
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Page 2
Calculator and Quick Reference Guide
Access your Quick Reference Guide 1084 Form and Case Study
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Does Our Applicant Have Ownership?
?Is this W-2 wage for Self-Employed or Salary income
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Page 1
Schedule E to Validate Ownership
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Page 11
1120S K-1
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Page 25
Review Form 1040, Line 7 for any additional W-2 Wages
– Review each W-2
– 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
Any Other W-2 Wages?
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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 before using
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Page 5
Schedule C
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Schedule C
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Schedule C
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Schedule C
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Page 6
Schedule C
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Schedule C
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Page 6
Schedule C
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Page 6
Schedule C
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Page 6
Schedule C
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Schedule C
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Page 6
Schedule C
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Schedule C
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Page 6
Schedule C
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Schedule C
.Only the $2,500 amortization is added back on the form or calculator
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Page 7
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.
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Schedule C
Additional depreciation can be found by multiplying business miles on
44a x IRS depreciation factor for that year.
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Schedule C
Use This Depreciation Option Only When Investor Policy Allows And The
Adjustment Is Needed To Qualify
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Schedule C
Verify 4562 is for the Schedule C
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Page 13
Schedule C
Business miles of 7899 x .24 cents = $1,895 in additional
depreciation that could be added back.
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Page 14
IRS Publication 463
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Schedule C
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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 the 1040 Line 13
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Pages 2, 8, 9
Schedule D
Where Did The $16,544 Loss On Line 6 Come From? The
1040 Showed A $3,000 Loss.
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Schedule D
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– Locate Calculator and Quick Reference
Guide for Rental Income
– Turn to Schedule E, Part I, Rentals
– Rental Income has been removed from
the Cash Flow Analysis Form
Genworth Rental Income Calculator
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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
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Mortgage Statement/Payment Coupon
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For Non-Impounded Loans: Obtain Tax And Insurance Information.
Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I
Payment Information Below Is From a Borrower Provided Mortgage
Statement And HOA Coupon.
– Taxes, Insurance and HOA Dues are Impounded
HOA DUES $165
$1,687
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2016 Schedule E Rental Income
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2016 Schedule E Rental Income
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2016 Schedule E Rental Income
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2016 Schedule E Rental Income
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2016 Schedule E Rental Income
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2016 Schedule E Rental Income
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2016 Schedule E Rental Income
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2016 Schedule E Rental Income
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2016 Schedule E Rental Income
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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 the true income/loss
based on the tax returns
Net Rental Income
$-131
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Net Rental Income
.Do not use leases; Use the “Cash Flow” from the property
– Flag the mortgage payment in your system as a rental property lien so that it will
NOT count it in the debt ratio
– You may need to override your REO Section
44 Renters Way225,000 180,400 3,500 2,500 875 -131
$1,852
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Training Tools and Information
Training Tools and Information
Fannie Mae Cash Flow Analysis Form (Form 1084) Pt I 8181
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Additional MI Site Information
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➢ ActionCenter®: 800 444.5664
➢ Your Local Genworth
Regional Underwriter
➢ Your Genworth Sales
Representative
Your Genworth Resources
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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 training is not intended as legal advice, and is
not a substitute for advice of counsel. You should always check with your own legal advisors for
interpretations of legal and compliance principles applicable to your business.
,GENWORTH EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED
INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO THESE MATERIALS AND THE RELATED TRAINING. IN
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CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER WITH RESPECT TO THE TRAINING AND
THE MATERIALS.
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