Fannie Mae Selling Guide updates include qualifying income, self-employment history changes

Fannie Mae on Wednesday released its October 2023 update to its Selling Guide, aiming to reflect changes in the mortgage industry, its surrounding regulatory environment and Fannie Mae policy positions.

The first update is a change to the documentation requirements for rental income that is used in a qualifying decision.

“We updated our policies for rental income to address various questions received from lenders,” the update explained. “These changes provide additional details for documenting rental income used for qualifying and reconciles differences in the way income earned from subject and non-subject properties is determined.”

For self-employment income, the Selling Guide has changed the tenure of qualifying history.

“We updated the Selling Guide to clarify the requirements for use of self-employment income when the borrower has less than a two-year history of self-employment,” the update document detailed. “These clarifications include a requirement for the signed personal and business federal income tax returns to reflect a minimum of 12 months of self-employment income from the current business.”

Requirements related to the Guide’s manufactured housing data plate have also been updated. Previously, the information from both the HUD Data Plate and HUD Certification Label were required to be included alongside photo exhibits, but now only one of the two will be required.

“If only one of these is available to the appraiser, that will satisfy compliance with the Selling Guide,” the update document explained. “If neither are available, the lender must obtain either a Label Verification Letter with the HUD Certification Label(s) information or [a] duplicate HUD Data Plate/Compliance Certificate from the Institute for Building Technology and Safety.”

This update does not apply, however, to newly constructed manufactured homes, since these documents are required on all newer units. This is a policy that lenders can take advantage of immediately, according to Fannie Mae.

Other updates include the clarification of value acceptance and property data, with Fannie Mae clarifying “to specifically state that property data collection must be obtained and submitted to Property Data API prior to the note date.”

Fannie Mae also lays out changes to pre-funding quality control (QC) sampling requirements that “allow lenders to exclude certain government loans that have the required government guaranty or government insurance,” as well as an “18-month lookback period (from the date of acquisition) for all post-purchase adjustments of loan-level price adjustments.”

While lenders are encouraged to make such updates to their own operations immediately, they must implement all of these changes by Jan. 1, 2024.

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