There is no indication that a Notice of Federal Tax Lien has been filed against the borrower in the county in which the subject property is located. When a borrower has entered into an installment agreement with the IRS to repay delinquent federal income taxes, the lender may include the monthly payment amount as part of the borrower’s monthly debt obligations (in lieu of requiring payment in full) if: ![]() When a borrower is obligated on a mortgage debt, regardless of whether or not the other party is making the monthly mortgage payments, the referenced property must be included in the count of financed properties (if applicable per B2-2-03, Multiple Financed Properties for the Same Borrower.įederal Income Tax Installment Agreements In order to exclude non-mortgage or mortgage debts from the borrower’s DTI ratio, the lender must obtain the most recent 12 months' canceled checks (or bank statements) from the other party making the payments that document a 12-month payment history with no delinquent payments. The borrower is not using rental income from the applicable property to qualify. There are no delinquencies in the most recent 12 months, and The party making the payments is obligated on the mortgage debt, When a borrower is obligated on a mortgage debt - but is not the party who is actually repaying the debt - the lender may exclude the full monthly housing expense (PITIA) from the borrower’s recurring monthly obligations if See below for treatment of payments due under a federal income tax installment agreement. Non-mortgage debts include installment loans, student loans, revolving accounts, lease payments, alimony, child support, and separate maintenance. This policy applies whether or not the other party is obligated on the debt, but is not applicable if the other party is an interested party to the subject transaction (such as the seller or real estate agent). When a borrower is obligated on a non-mortgage debt - but is not the party who is actually repaying the debt - the lender may exclude the monthly payment from the borrower's recurring monthly obligations. To ensure that the obligation is counted only once, the lender should adjust the net income of the business by the amount of interest, taxes, or insurance expense, if any, that relates to the account in question.Ĭertain debts can be excluded from the borrower’s recurring monthly obligations and the DTI ratio: If the account in question has a history of delinquency. It is reasonable to assume that the obligation has not been accounted for in the cash flow analysis. If the business provides acceptable evidence of its payment of the obligation, but the lender’s cash flow analysis of the business does not reflect any business expense related to the obligation (such as an interest expense-and taxes and insurance, if applicable-equal to or greater than the amount of interest that one would reasonably expect to see given the amount of financing shown on the credit report and the age of the loan). ![]() If the business does not provide sufficient evidence that the obligation was paid out of company funds. The account payment must be considered as part of the borrower’s DTI ratio in any of the following situations: The lender’s cash flow analysis of the business took payment of the obligation into consideration. The business provides acceptable evidence that the obligation was paid out of company funds (such as 12 months of canceled company checks), and The account in question does not have a history of delinquency, ![]() ![]() The account payment does not need to be considered as part of the borrower’s DTI ratio if: When a self-employed borrower claims that a monthly obligation that appears on their personal credit report (such as a Small Business Administration loan) is being paid by the borrower’s business, the lender must confirm that it verified that the obligation was actually paid out of company funds and that this was considered in its cash flow analysis of the borrower’s business.
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