How to Manage Fannie Mae® Rep & Warrant for Schedule E Rental Income

Overview

Income Analysis rapidly provides you access to Fannie Mae^® Rep and Warrant (R&W) results for borrower rental income from IRS Schedule E (Form 1040). This enhanced loan framework streamlines the fulfillment process, reduces risk and enhances investor confidence through added protection against future repurchase demands.

When all data from Schedule E is submitted from Income Analysis, is automatically processed by Fannie Mae to confirm accuracy and eligibility for relief. The R&W status for your order is easy to identify and will be reflected in the appearance of the FNMA Surround.

Consider the following:

• 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 Confirm EPC Income Source Matching 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.

• Fannie Mae requires you to attest to facts about the rental income on the Fannie Mae Rental Attestation popup.

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 use a conservative set of industry standard guidelines by default.

1. From the Investor Guideline dropdown menu, select FNMA (Fannie). A guideline option confirmation popup displays.

2. Depending on the scenario, selectable options may appear in the popup. If presented with options, make your selections.

3. Review the messaging, then click Save.

4. Observe the updated investor is reflected.

Identify the relief status

1. From the Income Calculation or LO View tabs, scroll to the Rental section.

2. Click the caret icon to expand the Schedule E Rental Income details.

3. Observe the FNMA Surround. The FNMA Surround appears to the right of each rental property record under Schedule E Rental Income. Each FNMA Surround is color coded, clickable and contains details about the rental property income as indicated by Fannie Mae.

   

• 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. 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.

Warning: To secure R&W relief, it is essential that the analysis include the DU Casefile ID when submitted to Fannie Mae.

Add the DU Casefile ID

1. From the Income Calculation or LO View tabs, navigate to the Rental section.

2. Click the caret icon to expand.

3. Click the FNMA surround.

4. Enter the DU Casefile ID.

5. Click Resend.

Warning: To secure R&W relief, it is essential that the analysis include the DU Casefile ID when submitted to Fannie Mae. Until the Casefile ID is added, the calculations remain in ‘Preview Mode’, indicated in red text.

Complete rental property matching

The details outlined in this section are only applicable Encompass^®-integrated users.

When reviewing rental income, ensure each rental property is matched to a record in Encompass^®. If any properties are unmatched, the task Confirm EPC Income Source Matching will appear in the Task List.

1. Select Task List from the upper right-hand corner of Income Analysis.

2. Locate the Confirm EPC Income Source Matching task, then click the caret icon to expand.

3. Review the rental properties listed in the 1003 LOS column and identify any entries that do not have a corresponding match. Properties without a match will be highlighted in red and labeled “No Match.” If a property is marked “No Match,” then you must manually add that property to your LOS before moving on to the next step.

4. After adding the property to your LOS, locate it in the property address dropdown menu and select the correct address to match.

5. Click Save.

6. Exit the Task List.

7. Return the the Rental income section, then click View/Resend to Fannie Mae.

8. Confirm the information on the Fannie Mae Rental Attestation popup.

9. Click Send to submit the updated rental income information to Fannie Mae. This ensures they have the latest data and will return updated results and feedback.

Complete the Fannie Mae Rental Attestation

1. When Income Analysis opens, you should be automatically directed to the Fannie Mae Rental Attestation popup.

   Tip: If you are not directed to the Fannie Mae Rental Attestation upon login, then click View/Resend to Fannie Mae. This action will prompt the Fannie Mae Rental Attestation popup to display.

2. Review each of the four questions carefully and select an appropriate response.

   1. If the loan is financing one of the Sch E properties, please select the property from the dropdown.

   2. Does borrower 1 own a principal residence or pay rent?

   3. If a Sch E rental is the borrower’s principal residence, please select the property from the dropdown.

   4. Does borrower 1 have at least 1 year history of receiving rental income or at least a 1 year history of property.  

3. From the Update PITIA section, review the current PITIA per month values to ensure they are the most up-to-date figures available. If necessary, manually enter values into the fields.

   Note: If you are an Encompass^® user, the fields will be pre-populated with the figures from the LOS.

4. Click the Comment icon to add comments.

5. Enter your comments and click Save Changes.

6. Click Update to save your changes.

7. Complete the Update Other Rental Info fields for each property listed.

8. When all attestations are updated and final, place a checkmark in the Check this box once the above information is confirmed to be accurate checkbox.

9. Click Send. Fannie Mae will will return Schedule E rental R&W results.

Descriptions for Rental Attestations

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 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.

Unaccept the Fannie Mae values to make edits

You are not required to accept Fannie Mae’s rental income calculations. If you choose not to, you can manually update and underwrite the loan file. However, when Fannie Mae’s values are accepted, the rental property fields are locked from making edits. To make changes, you must first unaccept the values.

1. Navigate to the Rental section.

2. Click the FNMA Surround to access the rental property popup.

3. In Fannie Mae Monthly Income Calculation section of the popup:

   1. Click Exit Preview, for loan files with a missing DU Casefile ID.

   2. Click Unaccept, for loan files with the DU Casefile ID already added.

4. Add your comments to the Comment box.

5. Click Close to exit the popup.

6. To edit a rental property entry, return to the line you want to update and click into any field or select Edit. This will open the Editing Rental Property popup with all fields unlocked for editing.

7. Once you complete your updates, click View/Resend to Fannie Mae. The Fannie Mae Rental Attestation displays.

8. Confirm the information in the Attestation, then click Send.

9. Finally, if you’re an Encompass^®-integrated user, click Update LOS to send the updated calculations to your Loan Origination System (LOS).

Note: You can revert to Fannie Mae’s original calculations at any time by clicking the FNMA Surround. Then, from the Fannie Mae Monthly Income Calculation section, click Preview for loan files missing a DU Casefile ID, or Accept for files where the DU Casefile ID has already been added.

Outcome

You can manage Fannie Mae R&W results for Schedule E rental income. You are able to track the relief status, complete rental matching, submit the Rental Attestation and unaccept values for manual updates when necessary.