Overview
Income Analysis' Rep and Warrant (R&W) relief framework brings together multiple relief programs from Fannie Mae® and Freddie Mac® to help lenders reduce risk, improve efficiency, and gain added protection against future repurchase demands.
Through partnerships with Fannie Mae and Freddie Mac, Cotality™ offers the following Rep and Warrant (R&W) relief programs:
Fannie Mae Calculator for Wage Income
Fannie Mae Calculator for Self-Employed Income
Fannie Mae Calculator for Schedule E Rental Income
Freddie Mac AIM Check for Digitized Paystubs and W-2 Wage Income
Freddie Mac AIM for Self-Employed Income
Note: For wage income, any R&W relief received for The Work Number (TWN), Single Source Verification or any qualified program are still in effect and are not impacted if the loan complies with the requirements within Desktop Underwriter® (DU) or Loan Product Advisor® (LPA).
Fannie Mae® Programs
Expand the accordions below to learn more about each program.
Fannie Mae® Rep & Warrant for Wage Income
Income Analysis rapidly provides Fannie Mae R&W results for Wage income. R&W results are indicated by the presence of a FNMA Surround located in the Wage income section of the Income Calculation tab. Each Surround is color coded, clickable and contains detailed feedback from the investor.
Green indicates that Fannie Mae has confirmed the Wage income for R&W relief. In this scenario the income figures are locked to prevent further edits.
Yellow indicates that additional information is required before Fannie Mae can evaluate the income. The Surround displays an exclamation point as an additional indicator.
Red indicates that Fannie Mae has confirmed the Wage income is eligible for R&W relief, but the Fannie Mae calculations have been unaccepted by a user so the income can be manually underwritten using alternate calculations.
Grey indicates that the Wage income has been reviewed by Fannie Mae and is not eligible for R&W relief.
Program considerations:
To receive R&W relief, you must select Fannie Mae from the Investor dropdown.
Underwriters can review Wage income from the Income Calculation tab, while Loan Officers can review it from the LO View tab.
The Employment Start Date is required for Fannie Mae to calculate and return Wage income R&W results.
Tip: For AutomatIQ® Borrower Portal loans you will need to enter this date. For Encompass loans, the date will be populated automatically using information from the loan file.
Fannie Mae may accept Supplemental Information to complete or improve Wage income calculations. This section is available as an expandable accordion within the investor popup.
You are not required to accept the calculations returned by Fannie Mae and may manually underwrite and update them as needed.
A DU Casefile ID is required to bind R&W relief. Without a DU Casefile ID, you can still view the Fannie Mae Wage results, but the calculations remain in PREVIEW MODE (displayed in red text) until the DU Casefile ID is added.
When Fannie Mae Wage results are accepted, the Wage income fields and calculations are locked, and the Edit option is unavailable. Click Unaccept (or Exit Preview for files without a DU Casefile ID) to remove Fannie Mae's values and unlock the fields for editing or manual underwriting.
You can revert to Fannie Mae's approved calculations at any time by clicking the FNMA Surround and selecting Accept (or Preview for files without a DU Casefile ID) from the investor popup.
For Encompass® users, clicking Update LOS sends the updated calculations to the Loan Origination System (LOS).
Fannie Mae® Rep & Warrant for Self Employed Income
Income Analysis rapidly provides Fannie Mae R&W results for Self Employed borrower income. R&W results are indicated by the presence of a FNMA Surround located in the Self Employed income section of the Income Calculation and LO View tabs. Each Surround is color coded, clickable and contains detailed feedback from the investor.
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Green indicates that Fannie Mae has confirmed the income for relief. In this scenario the income figures are locked to prevent further edits. When the surround is green but the the record displays Preview Mode, it means that the DU Casefile ID is missing. The ID should be added then resubmitted to Fannie Mae.
Yellow indicates that only one year of tax data has been submitted to Fannie Mae, but two years of tax data are required to determine eligibility.
Red indicates that the income submitted is ineligible and does not qualify for relief. This does not mean that the income can’t be considered as part of the qualifying income, however.
Warning: To secure R&W relief, it is essential that the analysis include the DU Casefile ID when submitted to Fannie Mae.
Program considerations:
You are not required to accept the calculations presented by Fannie Mae. You have the option to manually update and underwrite loan file calculations with applicable supporting documentation.
To bind approved calculations to the loan, simply enter the DU Casefile ID into Income Analysis. Until the Casefile ID is added, the calculations remain in “Preview Mode,” which is clearly indicated by red text throughout the application and on the PDF report.
The Income Calculator integrates with DU to ensure one-year documentation relief is applied when eligible. To support this, make sure all start dates are entered and current. For a quick and easy way to review start dates, refer to the Task List for an easy State Date view.
Fannie Mae gives you the ability to attest to Manual Options, resubmit the loan and still receive R&W relief. Be sure to review the list of potential Manual Options that may appear in the popup window.
Manual options for Fannie Mae self employed income
Manual Options | Condition Displayed | Business Type |
|---|---|---|
Non-Deductible Meals & Entertainment For 2022/2021 tax years, restaurant meals were 100% deductible and therefore deductible meals are not used do derive non-deductible meals. You should include any non-deductible meals here. | Always. | Schedule C |
Mortgages, notes, and bonds payable in< 1Yr If the loan file contains evidence that all or some mortgages, notes and bonds payable in less than 1 year do regularly rollover or are a line of credit, key that amount in here. | Mortgage/Notes Payable are present for Recent Year or Prior Year. | 1065 and 1120s |
Extraordinary One-Time Expenses Your underwriting analysis must describe the circumstances that justify the extraordinary and one-time nature of the expense. You may request documentation from the borrower to support the determination that the expense is extraordinary and nonrecurring. | Always. | Schedule C, 1120s and 1065 |
Include 1125E Compensation of Officers There is money for recent year and money for prior year of 1125E compensation. If the W2s are unavailable and it is determined that the amount was included on the borrower's 1040, Line 1, check to include. | If 1125e Comp of Officers has income for the borrower and no W2 document from borrower's business. | 1120s |
Include 1120S Compensation of Officers There is $X for recent year and $Y for prior year of 1120S compensation. If the W2s are unavailable and it is determined that the amount was included on the borrower's 1040, Line 1, check to include. | If 1120s Comp of Officers Line 7 has a value and there is no more than 1 shareholder on Line I of the business return and there is no W2 document from borrower's business nor Form 1125e present. | 1120s |
Less than 2 years The employment or occupation history is similar to the current self-employment and the most recent signed federal income tax returns reflect receipt of current self-employment income at the same (or greater) level than the prior employment. | Business start date is > 1 year and < 2 years from loan application date. | Schedule C, 1120s and 1065 |
Liquidity You will confirm the business has adequate liquidity to support the withdrawal of earnings outside of Income Calculator. | If the Quick Ratio < 1. | 1065 and 1120s |
Fannie Mae® Rep & Warrant for Schedule E Rental Income
Income Analysis rapidly provides Fannie Mae R&W results from an IRS Schedule E (Form 1040). R&W results are indicated by the presence of a FNMA Surround located in the Rental income section of the Income Calculation and LO View tabs. Each Surround is color coded, clickable and contains detailed feedback from the investor.
Green indicates that Fannie Mae has confirmed the rental income for relief. In this scenario the income figures are locked to prevent further edits.
Yellow indicates that the DU Casefile ID has not been provided.
Tip: If the FNMA surround displays yellow and you need to provide a DU Casefile ID, then click the FNMA surround, enter the DU Casefile ID, and click Resend.
Red indicates one of the following 1) the submitted rental income has not been confirmed as eligible for representation and warranty relief; or 2) the Fannie Mae Rental Income Attestation has not yet been completed and submitted.
Note: If the surround remains red after the attestation has been completed, it means that Fannie Mae has reviewed the submission and determined that the rental income does not meet the criteria for relief.
Program considerations:
The Schedule E Rental Program currently includes rental income reported to the IRS using form 1040, Schedule E, Part 1.
Loan Officers and Underwriters can interact and submit rental income to Fannie Mae on the Income Calculation and LO View tabs.
You are not required to accept the calculations presented by Fannie Mae. You have the option to manually update and underwrite loan file calculations with applicable supporting documentation.
If you are an Encompass-integrated user, then make sure that all Schedule E rental properties have their liabilities linked in Encompass.
If you are an Encompass-integrated user, then make sure to review the Rental match task in the Task List to ensure each rental property in Income Analysis is matched to a record in Encompass. If new matches are made, resend to Fannie Mae by reloading the Attestation Popup and clicking "Send". This ensures that accurate PITIA information from Encompass is used.
To bind approved calculations to the loan, simply enter the DU Casefile ID into Income Analysis. Until the Casefile ID is added, the calculations remain in “Preview Mode,” which is clearly indicated by red text throughout the application and on the PDF report.
Fannie Mae requires you to attest to facts about the rental income on the "Attestation" popup. Refer to the Descriptions for Rental Attestations.
Descriptions for rental attestations
Rental Attestations | Answer |
|---|---|
Please select if any of the properties are subject properties. From the dropdown, select if one of the properties listed on the Schedule E is the subject property. |
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Does borrower have housing expense? Select Yes if the borrower has a housing expense. If the borrower does not own a principal residence and does not have a current housing expense (such as rent), then depending on the history of receiving rental income, the property's rental income may not be acceptable for use in loan qualification. |
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If a rental is the borrower's principal residence please select. From the dropdown, select the Schedule E property if it is the borrower's principal residence. Leave as N/A if the borrower's principal residence is not listed on the drop down. |
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Does borrower have at least a 1-year history of receiving rental income or at least a 1 year history of property management? Select Yes if the borrower has at least 1-year history of receiving rental income or at least a 1-year history of property management. Select No if they have less than 1-year history of property management or of receiving rental income. Update PITIA Review this field and if it does not contain the most up to date information, key in the current monthly housing expense (principal, interest, taxes, insurances, and homeowner's association dues) for the rental property. |
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Update PITIA. Review this field and if it does not contain the most up to date information, key in the current monthly housing expense (principal, interest, taxes, insurances and homeowner's association dues) for the rental property. | Key in value. |
Othr Ded Ml Other Deductible Mortgage Interest, Line 13, may contain deductible mortgage interest paid to a non-bank or split among multiple property owners. Look for an attachment that describes the Other interest amount shown on Line 13. If there is no attachment, the loan file must contain evidence that any amount shown below is deductible mortgage interest. | Key in value. |
Fair Rental Days Fair Rental Days will be displayed per the Schedule E tax form. No action needed. | N/A |
Alt Fair Rental Days Key in Alt Fair rental days if Fair Rental Day field is empty on Schedule E Form and if the Fair Rental Days Missing Reason question is answered: "Property is rented less than the full year". | Key in value. |
Fair Rental Days Less than 365 Reason Select the reason from the dropdown for why the Fair Rental Days listed on Schedule E are less than 365 days. |
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Fair Rental Days Missing Reason Select the reason from the dropdown for why the Schedule E Fair Rental Days are missing. |
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Other Property Type? Check the tax return for an attachment detailing Other Property. If it generates Rental Income per the Fannie Mae Selling Guide, select "Yes". If not, or no attachment is found, select "No". |
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Extraordinary One Time Expenses The lender's underwriting analysis must describe the circumstances that justify the extraordinary and one-time nature of the expense. The lender may request documentation from the borrower to support its determination that the expense is extraordinary and nonrecurring. | Key in value. |
Accessory Unit or Boarder Income Enter the amount of accessory unit rental income or boarder income included on Sch E Line 3. | Key in value. |
Advanced rental exception scenarios
Exception scenarios will be indicated in the Fannie Mae Messages displayed within the FNMA rental popup. In exception scenarios, the Fannie Mae surround(s) will be in orange and reflect "$0.00" income. To address exception scenarios you must follow the Fannie Mae instructions indicated in the message(s). Review the Exception Scenarios messages and actions.
Note: Fannie Mae will include the exact dollar amount in the message that user must use.
Exception Scenarios | Action in LOS |
|---|---|
The borrower has less than a one-year history of receiving rental income or documented property management experience. Enter the following property data in Section 3 of the Uniform Residential Loan Application: Monthly Rental Income as $[RentalPropertyHousingPaymentAmount] which is the user-provided sum of the property's full principal, interest, tax, insurance, and homeowner's association dues (PITIA) and Net Monthly Rental Income as $[RentaIPropertyHousingPaymentAmount]. |
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The borrower has less than a one-year history of receiving rental income or documented property management experience. Enter the following property data in Section 3 of the Uniform Residential Loan Application: Monthly Rental Income as $[RentalPropertyMonthlyRentallncomeAmount] and Net Monthly Rental Income as $[0.01] (one penny). |
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The borrower has less than a one-year history of receiving rental income or documented property management experience. Enter the following property data in Section 3 of the Uniform Residential Loan Application: Monthly Rental Income as $[RentalPropertyHousingPaymentAmount] which is the user-provided sum of the property's full principal, interest, tax, insurance, and homeowner's association dues (PITIA) and Net Monthly Rental Income as $[0.01] (one penny). |
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The borrower has less than a one-year history of receiving rental income or documented property management experience. Enter the following property data in Section 3 of the Uniform Residential Loan Application: Monthly Rental Income as $[RentalPropertyMonthlyRentallncomeAmount] and Net Monthly Rental Income as $[RentalPropertylncomeMinusPITIAAmount]. |
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The borrower has less than a one-year history of receiving rental income or documented property management experience. Enter the following property data in Section 3 of the Uniform Residential Loan Application: Monthly Rental Income as zero ($(0.00]) and Net Monthly Rental Income as [($RentalPropertyHousingPaymentAmount)] which is the user provided sum of the property's full principal, interest, tax, insurance, and homeowner's association dues (PITIA) entered as a negative value. |
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The borrower has at least a one-year history of receiving rental income or documented property management experience. Enter the following property data in Section 3 of the Uniform Residential Loan Application: Monthly Rental Income as $[RentalPropertyMonthlyRentallncomeAmount] and Net Monthly Rental Income as$[RentaIPropertyMonthlyRentallncomeAmount]. |
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Rental income cannot be used for qualifying purposes if the borrower does not have a housing payment. Enter the following property data in Section 3 of the Uniform Residential Loan Application: Monthly Rental Income as zero ($(0.00]) and Net Monthly Rental Income as [($RentaIPropertyHousingPaymentAmount)] which is the user-provided sum of the property's full principal, interest, tax, insurance, and homeowner's association dues (PITIA) entered as a negative value. |
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The borrower has at least a one-year history of receiving rental income or documented property management experience. Enter the following property data in Section 3 of the Uniform Residential Loan Application: Monthly Rental Income as $[RentalPropertyMonthlyRentallncomeAmount] and Net Monthly Rental Income as $[0.01] (one penny). |
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Freddie Mac® Programs
Expand the accordions below to learn more about each program.
Freddie Mac® AIM Check for Digitized Paystubs and W-2 Wage Income
Income Analysis provides Freddie Mac AIM Rep & Warrant (R&W) results for wage income through the Freddie Mac Asset and Income Modeler (AIM) for Digitized Pavstubs and W-2's. This AIM Check API integration with Income Analysis helps you assess borrower eligibility and manage loan quality more effectively.
R&W results are indicated by the presence of a FHLMC Surround located in the Wage income section of the Income Calculation and LO View tabs. Each Surround is color coded, clickable and contains detailed feedback from the investor.
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Green indicates that Freddie Mac has confirmed the income for relief.
Yellow indicates the Application Date and/or Employment Start Date may be missing for one or more companies per borrower.
Red indicates that the loan is eligible for relief, however a user has chosen to “Unaccept” Freddie Mac’s calculations.
Grey indicates that the loan is ineligible for relief.
Program considerations:
Freddie Mac AIM R&W verification is registered through LPA. Make sure that the AIM Reference Numbers are entered into the correct field in your LOS or directly through LP.
AIM Reference Numbers for each borrower are provided on the user interface. Each time data is exchanged from Income Analysis to Freddie Mac the last two digits of the AIM Reference Number(s) increase by one digit.
Note: With the integration between Income Analysis product and Encompass, the AIM Reference Number(s) are automatically updated each time you click “Update LOS”. You can find these numbers on the “GSE Additional Provider Data” form under “Service Provider Name & Reference Number”. If they are missing, you can copy and paste them directly from Income Analysis to the field in Encompass. Review the Encompass Desktop and Encompass Web illustrations for reference.
If you’re an Encompass-integrated user, you must click Update LOS to ensure the values between Income Analysis and the LOS are aligned and updated.
When submitting income documents, be sure to include your borrower’s W-2’s from the past two years and the most recent paystubs dated within 30 days of your borrower’s application date.
Note: If the most recent W-2 from the prior year is unavailable, submit the year-end pay stub for that same year instead.
AIM Reference Number(s) Location in Encompass Desktop
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AIM Reference Number(s) Location in Encompass Web
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Freddie Mac® Asset and Income Modeler (AIM) for Self-Employed Income
Income Analysis provides Freddie Mac AIM Rep & Warrant (R&W) results for self-employed income through the Freddie Mac Asset and Income Modeler (AIM) for Self-Employment Program.
Freddie Mac AIM R&W verification is provided directly through Loan Product Advisor® (LPA). To take advantage of this program, first run Income Analysis on the borrower's financials. Once the analysis is complete, take the Freddie Report ID and enter it directly into LPA to view eligibility results.
Program considerations:
If you’re an Encompass-integrated user, then Income Analysis will automatically update the Freddie Report ID in the GSE Additional Provider Data page of Encompass, specifically in the CoreLogic Income Analysis (Bor, CoBor) field. The Freddie Report ID can also be located on both the email notifications you receive after submitting an Income Analysis order or the PDF Income Report within Income Analysis.
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When you run LP, Freddie Mac will retrieve the self-employment income data from our digital gateway and perform the Rep & Warrant evaluation in real time. The feedback certificate will document whether the calculated income qualifies for relief. Reference the LPA Feedback Certificate Examples.
After you make updates to the calculations, such as short-term notes cashflow adjustments, make sure to send Freddie Mac the updates by clicking Send Freddie (Adj) from the Output Options dropdown menu. Once complete, rerun LP to receive feedback on the updates.
View the Freddie AIM User Guide for AIM specific instruction.
LPA Feedback Certificate Examples |
Eligible for R&W Relief
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Invalid Documentation
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Missing Documentation
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Tax Extension Feature
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Outcome
You can identify investors that offer R&W relief programs, review program requirements and terms, and evaluate the R&W relief status for each investor.