65.18: Borrower income documentation (Future effective date 07/01/13)

Transcription

1 Freddie Mac Single Family / Single-Family Seller/Servicer Guide, Bulletins and Industry Letters / Single-Family Seller/Servicer Guide, Volume 2 / Chs. 64-A69: Servicing Nonperforming Mortgages / Chapter 65: Loss Mitigation / 65.18: Borrower documentation (02/15/13) FUTURE REVISION 07/01/13 [HIDE] REVISION NUMBER: DATE: 07/01/2013 REVISION REMARKS: THIS C O NT ENT WILL BEC O ME EFFEC T IV E O N 07/01/2013. CURRENT REQ U IREMENT S A P P EA R U NSHA DED BELO W : Borrower documentation (Future effective date 07/01/13) (a) Verification of A Servicer must verify the for all Borrowers on the Note when evaluating a Borrower for certain workout or relief options. The Borrower's must be supported by documentation that is not more than 90 days old as of the date the Servicer first determines that the Borrower submitted a complete Borrower Response Package. (Refer to Section 64.6 for information on the Borrower Response Package.) (b) Required documentation The Borrower must document all sources of by providing the following documentation as part of the Borrower Response Package: Income Source All Required Documentation In addition to the documentation listed below, all Borrowers must provide a completed and signed IRS Form 4506T- EZ, Short Form, Request for Individual Tax Return Transcript. Servicers must obtain IRS Form T, Request for Transcript of Tax Return, in lieu of Form 4506T-EZ if the Borrower (i) is self-employed, and/or (ii) files federal tax returns based on a fiscal calendar year (i.e., a tax year beginning in one calendar year and ending in the following year) and/or (iii) receives rental. The Servicer must submit the Form 4506T-EZ or 4506-T to the IRS to obtain a copy of the Borrower's tax transcript in the following instances: The Borrower is being evaluated for the Home Affordable Modification Program but the Borrower has not provided his or her signed federal tax return, complete with all schedules and forms To reconcile inconsistencies between other information the Borrower provided (e.g., information the Borrower provided in Form 710, Uniform Borrower Assistance Form) and the documentation The Borrower has that is required to be documented by the Borrower's most recent federal tax return but the Borrower has not provided his or her signed federal tax return, complete 1/12

2 his or her signed federal tax return, complete with all schedules and forms (e.g., self- employed Borrowers) Upon request by Freddie Mac IRS Forms 4506T-EZ and 4506-T are available at Servicers are encouraged to use the IRS Income Verification Express Service (IVES), which uses secure to deliver tax return transcripts to Servicers. Employment (Salaried or hourly wage earner) Self-employment Pay stub(s) that reflect(s) the most recent 30 days' earnings and documentation reflecting year- to- date earnings if not reported on the paystub(s) (e.g., signed letter or printout from the employer). A complete signed individual federal tax return, and, as applicable, the business tax return (e.g., IRS Forms 1120, 1120S and 1065); and either: The most recent signed and dated quarterly or yearto- date profit and loss statement that reflects activity for the most recent three months; or Copies of bank statements for the business account for the last two months to document continuation of business activity. When calculating gross for self- employed Borrowers, a Servicer should include the Borrower's net profit plus any salary draw amounts that were paid to the Borrower in addition to adding any of the allowable adjustments used in analyzing the tax returns for the business, such as non- recurring and expenses, depreciation and depletion (if applicable). Other earned (such as bonus, commission, housing allowance, tips, overtime) Reliable third party documentation describing the amount and nature of the (e.g., an employment contract or printouts documenting tip ). When verifying annualized based on the year- todate earnings reflected on paystubs, Servicers may, based on their good business judgment, make adjustments when it is likely that sources of additional (bonus, commissions, etc.) are not likely to continue. Rental Borrower's complete and signed individual tax return that includes Schedule E Supplemental Income and Loss for the most recent tax year. When Schedule E is not available to document rental because the property was not previously rented, Servicers may accept a current lease agreement and bank statements or cancelled rent checks demonstrating receipt of rent If the Borrower is using from the rental of a portion of the Borrower's Primary Residence (i.e., rental from a boarder) or rental from a 2- to 4-unit property that also serves as the Borrower's Primary Residence, the must be 2/12

3 Borrower's Primary Residence, the must be calculated at 75% of the monthly gross rental, with the remaining 25% considered vacancy loss and maintenance expense. If the Borrower is using rental from properties other than the Borrower's Primary Residence, the to be calculated should be 75% of the monthly gross rental, reduced by the monthly debt service on the property, if applicable. Note: Rental should not be included in the Borrower's monthly gross if there is currently no rental being received due to vacancy (even if rental was identified in the Borrower's tax return or tax transcript). Alimony, separate maintenance and child support Copy of the divorce decree, separation agreement or other legal agreement filed with a court, or a court decree that provides for the payment of alimony, separate maintenance or child support and states the amount of the award and the period of time over which the payments will be received; and Copies of the two most recent bank statements or other third- party documents showing receipt of payments Alimony, child support or separate maintenance need not be revealed if the Borrower does not choose to have it considered for repaying the Mortgage. Social Security, disability or death benefits, pension, public assistance, or adoption assistance Documentation showing the amount and frequency of the benefits such as letters, exhibits, a disability policy or benefits statement from the provider; and Documentation showing the receipt of payment, such as copies of the two most recent bank statements showing deposit amount. Note: If a benefits statement is not available, Servicers may rely only on receipt of payment evidence, if it is clear that the Borrower's entitlement is ongoing. Unemployment benefits Non-Borrower Not an acceptable source of. Servicers should include non- Borrower household in the monthly gross if: It is voluntarily provided by the Borrower; The non- Borrower is a relative, spouse, domestic partner or fiancé/fiancée The Servicer verifies that the non- Borrower occupies the subject property as a Primary Residence based on a review of a credit report or other documentation (e.g., utility bills, pay stubs, benefits statements); and 3/12

4 There is documentary evidence to support that the has been, and reasonably can continue to be, relied upon to support the Mortgage payment All non- obligor or "non- Borrower" household included in monthly gross must be documented and verified by the Servicer using the same standards for verifying a Borrower's. A Servicer should not consider expenses of non- Borrower household members, but may only consider the percentage of his or her that the non-borrower routinely contributes to the household. Passive/Nonwage Unless specified otherwise, the Servicer must document all, including passive/non- wage. In cases where the Borrower has investment, the Servicer must obtain the two most recent investment/bank statements supporting receipt of this. (c) Determining gross monthly The Borrower's gross includes all taxable and non- taxable, before any payroll deductions, including, but not limited to, base wages and salaries, overtime pay, commissions, fees, tips, bonuses, housing allowances, other compensation for personal services, Social Security payments, including Social Security received by adults on behalf of minors or by minors intended for their own support, payments from annuities, insurance policies, retirement funds, and pensions, disability or death benefits, and positive net rental, except that the Borrower may, but is not required to, provide alimony, child support or separation maintenance. The Servicer may gross up all non-taxable received by the Borrower only if the Borrower is able to provide documentation verifying that the is not taxable. The Servicer must maintain such documentation in the Mortgage file. To gross up non- taxable, the Servicer must multiply the amount of the nontaxable by 1.25; if the actual amount of federal or State taxes that would be paid is more than 25% of the Borrower's nontaxable, the Servicer may use the actual percentage. (d) Substitution of documents When a Borrower is in an active Chapter 7 or Chapter 13 bankruptcy, the Servicer may accept copies of the bankruptcy schedules and tax returns (if returns are required to be filed) in lieu of Form 710, and IRS Form 4506T-EZ or IRS Form 4506, and may use this information to determine Borrower eligibility (with the documentation). Servicers should request the schedules and tax returns from the Borrower, Borrower's counsel or bankruptcy court. If the bankruptcy schedules are more than 90 days old as of the date that such schedules are received by the Servicer, the Borrower must provide updated evidence of in accordance with Section 65.18(b). Related Guide Bulletins Issue Date Bulletin March 27, /12

5 Bulletin February 15, 2013 REVISION HISTORY 11/01/12 [HIDE] REVISION NUMBER: DATE: 11/01/2012 REVISION REMARKS: THIS C O NT ENT HA S C HA NGED. CU RRENT REQ U IREMENT S A P P EA R U NSHA DED BELO W : Borrower documentation (Effective: 11/01/12) (a) Verification of A Servicer must verify the for all Borrowers on the Note when evaluating a Borrower for a workout or certain relief options. The Borrower's must be supported by documentation that is not more than 90 days old as of the date the Servicer first determines that the Borrower submitted a complete Borrower Response Package. (Refer to Section 64.6 for information on the Borrower Response Package.) (b) Required documentation The Borrower must document all sources of by providing the following documentation as part of the Borrower Response Package: Income Source All Required Documentation In addition to the documentation listed below, all Borrowers must provide a completed and signed IRS Form 4506T- EZ, Short Form, Request for Individual Tax Return Transcript. Servicers must obtain IRS Form T, Request for Transcript of Tax Return, in lieu of Form 4506T-EZ if the Borrower (i) is self-employed, and/or (ii) files federal tax returns based on a fiscal calendar year (i.e., a tax year beginning in one calendar year and ending in the following year) and/or (iii) receives rental. The Servicer must submit the Form 4506T-EZ or 4506-T to the IRS to obtain a copy of the Borrower's tax transcript in the following instances: The Borrower is being evaluated for the Home Affordable Modification Program but the Borrower has not provided his or her signed federal tax return, complete with all schedules and forms To reconcile inconsistencies between other information the Borrower provided (e.g., information the Borrower provided in Form 710, Uniform Borrower Assistance Form) and the documentation The Borrower has that is required to be documented by the Borrower's most recent federal tax return but the Borrower has not provided his or her signed federal tax return, complete 5/12

6 his or her signed federal tax return, complete with all schedules and forms (e.g., self- employed Borrowers) Upon request by Freddie Mac IRS Forms 4506T-EZ and 4506-T are available at Servicers are encouraged to use the IRS Income Verification Express Service (IVES), which uses secure to deliver tax return transcripts to Servicers. Employment (Salaried or hourly wage earner) Self-employment Pay stub(s) that reflect(s) the most recent 30 days' earnings and documentation reflecting year- to- date earnings if not reported on the paystub(s) (e.g., signed letter or printout from the employer). A complete signed individual federal tax return, and, as applicable, the business tax return (e.g., IRS Forms 1120, 1120S and 1065); and either: The most recent signed and dated quarterly or yearto- date profit and loss statement that reflects activity for the most recent three months; or Copies of bank statements for the business account for the last two months to document continuation of business activity. When calculating gross for self- employed Borrowers, a Servicer should include the Borrower's net profit plus any salary draw amounts that were paid to the Borrower in addition to adding any of the allowable adjustments used in analyzing the tax returns for the business, such as non- recurring and expenses, depreciation and depletion (if applicable). Other earned (such as bonus, commission, housing allowance, tips, overtime) Reliable third party documentation describing the amount and nature of the (e.g., an employment contract or printouts documenting tip ). When verifying annualized based on the year- todate earnings reflected on paystubs, Servicers may, based on their good business judgment, make adjustments when it is likely that sources of additional (bonus, commissions, etc.) are not likely to continue. Rental Borrower's complete and signed individual tax return that includes Schedule E Supplemental Income and Loss for the most recent tax year. When Schedule E is not available to document rental because the property was not previously rented, Servicers may accept a current lease agreement and bank statements or cancelled rent checks demonstrating receipt of rent If the Borrower is using from the rental of a portion of the Borrower's Primary Residence (i.e., rental from a boarder) or rental from a 2- to 4-unit property that also serves as the 6/12

7 a 2- to 4-unit property that also serves as the Borrower's Primary Residence, the must be calculated at 75% of the monthly gross rental, with the remaining 25% considered vacancy loss and maintenance expense. If the Borrower is using rental from properties other than the Borrower's Primary Residence, the to be calculated should be 75% of the monthly gross rental, reduced by the monthly debt service on the property, if applicable. Note: Rental should not be included in the Borrower's monthly gross if there is currently no rental being received due to vacancy (even if rental was identified in the Borrower's tax return or tax transcript). Alimony, separate maintenance and child support Copy of the divorce decree, separation agreement or other legal agreement filed with a court, or a court decree that provides for the payment of alimony, separate maintenance or child support and states the amount of the award and the period of time over which the payments will be received; and Copies of the two most recent bank statements or other third- party documents showing receipt of payments Alimony, child support or separate maintenance need not be revealed if the Borrower does not choose to have it considered for repaying the Mortgage. Note: The Servicer must have determined that the will continue for at least the next three years in order for the to be considered in calculating the terms of the modification. Social Security, disability or death benefits, pension, public assistance, or adoption assistance Documentation showing the amount and frequency of the benefits such as letters, exhibits, a disability policy or benefits statement from the provider; and Documentation showing the receipt of payment, such as copies of the two most recent bank statements showing deposit amount. Note: If a benefits statement is not available, Servicers may rely only on receipt of payment evidence, if it is clear that the Borrower's entitlement is ongoing. Unemployment benefits Non-Borrower Not an acceptable source of. Servicers should include non- Borrower household in the monthly gross if: It is voluntarily provided by the Borrower; The non- Borrower is a relative, spouse, domestic partner or fiancé/fiancée 7/12

8 The Servicer verifies that the non- Borrower occupies the subject property as a Primary Residence based on a review of a credit report or other documentation (e.g., utility bills, pay stubs, benefits statements); and There is documentary evidence to support that the has been, and reasonably can continue to be, relied upon to support the Mortgage payment All non- obligor or "non- Borrower" household included in monthly gross must be documented and verified by the Servicer using the same standards for verifying a Borrower's. A Servicer should not consider expenses of non- Borrower household members, but may only consider the percentage of his or her that the non-borrower routinely contributes to the household. Passive/Nonwage Unless specified otherwise, the Servicer must document all, including passive/non- wage. In cases where the Borrower has investment, the Servicer must obtain the two most recent investment/bank statements supporting receipt of this. (c) Determining gross monthly The Borrower's gross includes all taxable and non- taxable, before any payroll deductions, including, but not limited to, base wages and salaries, overtime pay, commissions, fees, tips, bonuses, housing allowances, other compensation for personal services, Social Security payments, including Social Security received by adults on behalf of minors or by minors intended for their own support, payments from annuities, insurance policies, retirement funds, and pensions, disability or death benefits, and positive net rental, except that the Borrower may, but is not required to, provide alimony, child support or separation maintenance. The Servicer may gross up all non-taxable received by the Borrower only if the Borrower is able to provide documentation verifying that the is not taxable. The Servicer must maintain such documentation in the Mortgage file. To gross up non- taxable, the Servicer must multiply the amount of the nontaxable by 1.25; if the actual amount of federal or State taxes that would be paid is more than 25% of the Borrower's nontaxable, the Servicer may use the actual percentage. 8/12

9 (d) Substitution of documents When a Borrower is in an active Chapter 7 or Chapter 13 bankruptcy, the Servicer may accept copies of the bankruptcy schedules and tax returns (if returns are required to be filed) in lieu of Form 710, Uniform Borrower Assistance Form, and IRS Form 4506T- EZ or IRS Form 4506, and may use this information to determine Borrower eligibility (with the documentation). Servicers should request the schedules and tax returns from the Borrower, Borrower's counsel or bankruptcy court. If the bankruptcy schedules are more than 90 days old as of the date that such schedules are received by the Servicer, the Borrower must provide updated evidence of in accordance with Section 65.18(b) : Borrower documentation (02/15/13) (a) Verification of A Servicer must verify the for all Borrowers on the Note when evaluating a Borrower for a workout or certain relief options. The Borrower's must be supported by documentation that is not more than 90 days old as of the date the Servicer first determines that the Borrower submitted a complete Borrower Response Package. (Refer to Section 64.6 for information on the Borrower Response Package.) (b) Required documentation The Borrower must document all sources of by providing the following documentation as part of the Borrower Response Package: Income Source All Required Documentation In addition to the documentation listed below, all Borrowers must provide a completed and signed IRS Form 4506T- EZ, Short Form, Request for Individual Tax Return Transcript. Servicers must obtain IRS Form T, Request for Transcript of Tax Return, in lieu of Form 4506T-EZ if the Borrower (i) is self- employed, and/or (ii) files federal tax returns based on a fiscal calendar year (i.e., a tax year beginning in one calendar year and ending in the following year) and/or (iii) receives rental. The Servicer must submit the Form 4506T-EZ or 4506-T to the IRS to obtain a copy of the Borrower's tax transcript in the following instances: The Borrower is being evaluated for the Home Affordable Modification Program but the Borrower has not provided his or her signed federal tax return, complete with all schedules and forms To reconcile inconsistencies between other information the Borrower provided (e.g., information the Borrower provided in Form 710, Uniform Borrower Assistance Form) and the documentation The Borrower has that is required to be documented by the Borrower's most recent federal tax return but the Borrower has not provided his or her signed federal tax return, complete with all schedules and forms (e.g., self- employed Borrowers) Upon request by Freddie Mac 9/12

10 Upon request by Freddie Mac IRS Forms 4506T-EZ and 4506-T are available at Servicers are encouraged to use the IRS Income Verification Express Service (IVES), which uses secure e- mail to deliver tax return transcripts to Servicers. Employment (Salaried or hourly wage earner) Self-employment Pay stub(s) that reflect(s) the most recent 30 days' earnings and documentation reflecting year- to- date earnings if not reported on the paystub(s) (e.g., signed letter or printout from the employer). A complete signed individual federal tax return, and, as applicable, the business tax return (e.g., IRS Forms 1120, 1120S and 1065); and either: The most recent signed and dated quarterly or year- todate profit and loss statement that reflects activity for the most recent three months; or Copies of bank statements for the business account for the last two months to document continuation of business activity. When calculating gross for self- employed Borrowers, a Servicer should include the Borrower's net profit plus any salary draw amounts that were paid to the Borrower in addition to adding any of the allowable adjustments used in analyzing the tax returns for the business, such as nonrecurring and expenses, depreciation and depletion (if applicable). Other earned (such as bonus, commission, housing allowance, tips, overtime) Reliable third party documentation describing the amount and nature of the (e.g., an employment contract or printouts documenting tip ). When verifying annualized based on the year- to- date earnings reflected on paystubs, Servicers may, based on their good business judgment, make adjustments when it is likely that sources of additional (bonus, commissions, etc.) are not likely to continue. Rental Borrower's complete and signed individual tax return that includes Schedule E Supplemental Income and Loss for the most recent tax year. When Schedule E is not available to document rental because the property was not previously rented, Servicers may accept a current lease agreement and bank statements or cancelled rent checks demonstrating receipt of rent If the Borrower is using from the rental of a portion of the Borrower's Primary Residence (i.e., rental from a boarder) or rental from a 2- to 4-unit property that also serves as the Borrower's Primary Residence, the must be calculated at 75% of the monthly gross rental, with the remaining 25% considered vacancy loss and maintenance expense. If the Borrower is using rental from properties other than the Borrower's Primary Residence, the to be 10/12

11 than the Borrower's Primary Residence, the to be calculated should be 75% of the monthly gross rental, reduced by the monthly debt service on the property, if applicable. Note: Rental should not be included in the Borrower's monthly gross if there is currently no rental being received due to vacancy (even if rental was identified in the Borrower's tax return or tax transcript). Alimony, separate maintenance and child support Copy of the divorce decree, separation agreement or other legal agreement filed with a court, or a court decree that provides for the payment of alimony, separate maintenance or child support and states the amount of the award and the period of time over which the payments will be received; and Copies of the two most recent bank statements or other third- party documents showing receipt of payments Alimony, child support or separate maintenance need not be revealed if the Borrower does not choose to have it considered for repaying the Mortgage. Social Security, disability or death benefits, pension, public assistance, or adoption assistance Documentation showing the amount and frequency of the benefits such as letters, exhibits, a disability policy or benefits statement from the provider; and Documentation showing the receipt of payment, such as copies of the two most recent bank statements showing deposit amount. Note: If a benefits statement is not available, Servicers may rely only on receipt of payment evidence, if it is clear that the Borrower's entitlement is ongoing. Unemployment benefits Non-Borrower Not an acceptable source of. Servicers should include non- Borrower household in the monthly gross if: It is voluntarily provided by the Borrower; The non- Borrower is a relative, spouse, domestic partner or fiancé/fiancée The Servicer verifies that the non- Borrower occupies the subject property as a Primary Residence based on a review of a credit report or other documentation (e.g., utility bills, pay stubs, benefits statements); and There is documentary evidence to support that the has been, and reasonably can continue to be, relied upon to support the Mortgage payment All non- obligor or "non- Borrower" household included in monthly gross must be documented and verified by the Servicer using the same standards for verifying a Borrower's. 11/12

12 A Servicer should not consider expenses of non- Borrower household members, but may only consider the percentage of his or her that the non- Borrower routinely contributes to the household. Passive/Non-wage Unless specified otherwise, the Servicer must document all, including passive/non- wage. In cases where the Borrower has investment, the Servicer must obtain the two most recent investment/bank statements supporting receipt of this. (c) Determining gross monthly The Borrower's gross includes all taxable and non- taxable, before any payroll deductions, including, but not limited to, base wages and salaries, overtime pay, commissions, fees, tips, bonuses, housing allowances, other compensation for personal services, Social Security payments, including Social Security received by adults on behalf of minors or by minors intended for their own support, payments from annuities, insurance policies, retirement funds, and pensions, disability or death benefits, and positive net rental, except that the Borrower may, but is not required to, provide alimony, child support or separation maintenance. The Servicer may gross up all non-taxable received by the Borrower only if the Borrower is able to provide documentation verifying that the is not taxable. The Servicer must maintain such documentation in the Mortgage file. To gross up non- taxable, the Servicer must multiply the amount of the non-taxable by 1.25; if the actual amount of federal or State taxes that would be paid is more than 25% of the Borrower's nontaxable, the Servicer may use the actual percentage. (d) Substitution of documents When a Borrower is in an active Chapter 7 or Chapter 13 bankruptcy, the Servicer may accept copies of the bankruptcy schedules and tax returns (if returns are required to be filed) in lieu of Form 710, Uniform Borrower Assistance Form, and IRS Form 4506T- EZ or IRS Form 4506, and may use this information to determine Borrower eligibility (with the documentation). Servicers should request the schedules and tax returns from the Borrower, Borrower's counsel or bankruptcy court. If the bankruptcy schedules are more than 90 days old as of the date that such schedules are received by the Servicer, the Borrower must provide updated evidence of in accordance with Section 65.18(b). Related Guide Bulletins Issue Date Bulletin February 15, /12