How to Work with Other Income for Underwriters

Overview

As an Underwriter you can work with other income from the Income Calculation tab of Income Analysis. Here, you will find details extracted from borrower documentation in the Other Income section of the page and includes:

Tax Exempt Interest
Alimony
Taxable and Non-Taxable Pension IRA Distribution
Unemployment Compensation
Taxable and Non-Taxable Social Security
Veterans Disability
Dividend and Interest
Estate or Trust Income

All income types that can be used for loan qualification are pulled from the tax returns and detailed in the Other Income section.

Note: Except for Social Security Award Letters, 1099, and Veterans Disability benefits, Income Analysis will not process account statements or ownership documentation.

Observe the Baseline, Potential and Adjusted income columns

The Income Calculation tab is the first tab displayed to you as an Underwriter. It is the primary screen that you work from and is viewable by Loan Officers. From here you will interact with borrower income that is categorized by Wage, Self Employed, Rental and Other income. The figures from each of these categories will automatically calculate the income totals and display them in one of the following three columns:

Baseline: Most conservative income figures calculated by using the exact documented values that align with guideline requirements and no conditioning.
Potential: Calculated income value that includes income opportunities which, with proper documentation, could be used to increase the borrower’s qualifying income.
Adjusted: Calculated value of income that reflects modifications or adjustments made by you during review. When a loan is initially reviewed, the Adjusted amount should mirror the Baseline value, unless Fannie Mae has immediate overrides.

Tip: Here are some examples that could increase the values presented in the Potential income column
1) a paystub showing a significantly higher rate of pay than the W-2;
2) commission indicated on the Paystub, but there is no two-year verification of income present in the file;
3) short term notes payable on a 1065 partnership.

Select the investor guideline

The Investor Guideline dropdown allows you to switch between investors and see alternative eligibility options. The Investor Guideline determines the set of investor rules that Income Analysis will use when calculating the income. When the initial order is submitted, the Investor Guideline will either have been chosen at that time or left blank. If the investor was left blank, then Income Analysis will default to the investor that your organization selected during configuration.

From the Investor Guideline dropdown menu, select the investor. A guideline option confirmation popup displays.
Depending on the investor selected, selectable options may appear in the popup. If presented with options, make your selections.
Review the messaging, then click Save Changes.
Observe the updated investor is reflected.

Toggle between borrowers

You can use the borrower tabs, located above the Wage section, to toggle between borrowers associated with the order. When you select a borrower’s name, you will see the income details specific to the borrower selected.

To review income details for a specific borrower, select the tab with the borrower’s name you want to review.
Use the slider to include or exclude a borrower’s wage income from the calculations.

Explore the Other Income section

You can access your calculations from the Other Income section of the Income Calculation tab. Explore the Other Income section features to better manage the income calculations.

Other Income Total: Total calculated value of Other income.
Current & 1040 Other Income: This expandable panel displays high-level income details, including the calculation being used. Click the caret icon to expand and view additional details.
Documentation Flag(s): Highlights quick details about the income documentation provided and any key actions taken by the Loan Officer, for example.
Income Checkbox: A checkmark in the income line item's checkbox indicates that the source is included in the calculation totals. To exclude a source from the calculations, simply uncheck the box.
B1→B2: Click the B1→B2 button to reassign other income to another borrower on your loan.
Edit or Accept: All income types that can be used for loan qualification and are pulled from the tax returns and will display values, along with Edit and Accept buttons. If necessary, use these buttons to take action to include the income in your qualifying totals.
Add Other Income: Use the Plus (+) icon to add other income to your loan.

Edit Other Income

You can edit each Other Income source to update data, adjust calculations, and select qualifying income. By default, income is calculated from historical values, but it will be deselected and shown as an “opportunity” until you confirm current ownership and continued receipt.

Click the caret icon to expand the Current & 1040 Other Income panel.
Locate the income source that you want to edit, then click Edit. The Editing popup displays.
Edit the details by modifying document, rate information or calculation fields. All fields displayed can be manually modified.
Use the Doc Date field to manually change your document date.
Select a different income payment frequency from the Frequency dropdown, if applicable.
Add the year-to-date value in the YTD field, if desired.
Enter one or more periodic amounts in the Enter Rate(s) section.
Modify the calculation time period using the Select Calc dropdown.
Add your comments in the Comment box.
Click Save Changes.
Finally, if you’re an Encompass®-integrated user, click Update LOS to send the updates to the Loan Origination System (LOS).

Add Other Income sources

The Adding Other Income popup has similar functionality to Editing popup. The feature allows you to add additional income sources and categorize the income as General, Non-Taxable or Asset Depletion.

Click the caret icon to expand the Current & 1040 Other Income panel.
From the lower left-hand corner click the Plus (+) icon. The Adding Other Income popup displays.
Enter a Income Name.
Select a Category from the dropdown menu to categorize the income source.
Tip:
- General: General is the default selection.
- Non-Taxable: The Non-Taxable selection allows for gross up.
- Asset Depletion: This selection allows for multiple asset types, whether taxable or non-taxable, in addition to accounting for liabilities or liquidations relevant to closing.
Enter your document date in the Doc Date field.
Select the income payment frequency using the Frequency dropdown.
Add the year-to-date value in the YTD field, if desired.
Enter one or more periodic amounts in the Enter Rate(s) section.
Select a calculation from the Select Calc dropdown.
Add your comments in the Comment box
Click Save Changes.
Finally, if you’re an Encompass®-integrated user, click Update LOS to send the updates to the Loan Origination System (LOS).

Review Social Security income

Both Taxable and Non-taxable Social Security Income (SSI) will be extracted from tax returns submitted to Income Analysis. The information extracted is presented in the Taxable Social Security Benefit or Non-taxable Social Sec Benefit panels. Considerations:

Non-taxable SSI will automatically be grossed up.
- For Federal Housing Administration (FHA) submissions, the lesser of 15% or actual tax rate will be used.
- For Government-Sponsored Enterprise (GSE) submissions, the standard 25% will be applied.
If an Award Letter or 1099 is submitted without tax returns, then 15% will automatically be grossed up. In the example below, Fannie Mae was the selected investor and an Award Letter with benefit of $2511 was analyzed with no tax history. In this example notice the 85/15 split between the taxable and non-taxable amounts, and the grossed up 25% amount of the non-taxable portion of SSI.
If tax returns are received, then the taxable/non-taxable ratio from the tax return will be applied. You can see this ratio if you click either any field on the panel that displays a value or the Edit button, opening the Editing Taxable (or Non-taxable) Social Security Benefit popup. The ratio from the tax return will appear aligned right at the bottom of the top section.

Outcome

You can work with Other Income, edit calculations and add additional income sources to your loan file.