Freddie Mac Issues Guidance for Sellers for Underwriting Self-Employed Borrowers

Freddie Mac today issued a bulletin providing temporary guidance for underwriting mortgage borrowers whose income is derived from self-employment during the coronavirus pandemic. At a minimum, sellers must obtain an unaudited year-to-date profit loss statement signed by the borrower that reports business revenue, expenses and net income and two months’ business account statements no older than the last two months represented on the YTD profit and loss statement. Alternatively, sellers may use an audited YTD profit and loss statement.

The bulletin also provides detailed guidance for reviewing this documentation, determining that a borrower has a stable monthly income and conducting a business review and analysis. Sellers are encouraged to apply these temporary requirements to existing mortgages in process, and they must be applied to mortgages with application received dates on or after June 11, 2020, until further notice.

In addition, the bulletin also provides temporary flexibilities for CHOICERenovation Mortgages, deliver requirements for “no cash-out” refinance mortgages and temporary eligibility requirements related to the purchase of delinquent mortgages in forbearance. Read the bulletin.