InfoBytes Blog
Fannie and Freddie issue temporary underwriting guidance for self-employment income; updates to renovation loan programs
On May 28, Fannie Mae and Freddie Mac issued guidance for underwriting self-employed borrowers during the Covid-19 pandemic. According to Fannie Mae’s Lender Letter LL-2020-03 and Freddie Mac’s Guide Bulletin 2020-19, lenders are now required to obtain additional documentation from self-employed borrowers to determine if the borrower’s income is “stable and has a reasonable expectation of continuance.” Lenders must obtain either (i) an audited year-to-date profit and loss statement for the business, or (ii) an unaudited year-to-date profit and loss statement signed by the borrower and two business depository account statements no older than the latest two months represented on the profit and loss statement. Bulletin 2020-19 and LL-2020-03 also provide guidance to assist lenders when reviewing the documentation to determine whether the business operations were impacted by the Covid-19 pandemic and whether they are considered stable. Fannie and Freddie encourage lenders to apply the temporary requirements immediately, however, they must be applied to any applications received on or after June 11.
Additionally, Bulletin 2020-19 provides temporary flexibilities with Freddie Mac’s “CHOICERenovation” Mortgages, and LL 2020-04 provides guidance on Fannie Mae’s “HomeStyle Renovation” loans. Fannie Mae also issued updates to its Covid-19 servicing FAQs.