Mortgage agencies update COVID-19 rules for self-employed borrowers

The Federal Housing Finance Agency (FHFA) has issued updated COVID-19 temporary rules for mortgages purchased by Fannie Mae and Freddie Mac. Mortgage lenders may apply the restrictions for loans currently in process; however, requirements are mandatory for all loan applications received on or after December 14, 2020. The COVID-19 temporary rule for self-employed borrowers has been revised to include the following documents, at a mininum:

  • Unaudited year-to-date profit and loss statement. The information must cover the most recent month preceding the application received date, and be dated no more than 60 calendar days prior to the note date
  • Three months’ business account statements no older than the latest three months represented on the year-to-date profit and loss statement

Alternatively, the following documents may be submitted:

  • Audited year-to-date profit and loss statement covering the most recent month preceding the application date and dated no more than 60 calendar days prior to the note date

In addition to the above documents, self-employed applicants must also submit the standard documents required by Fannie Mae and Freddie Mac such as two years’ federal 1040 tax returns and two years’ business tax returns. Business tax returns are not required for businesses in operation for five years or more.

Small business owners that do not have a separate business account may submit personal asset account statements evidencing business deposits and expenses. The income reported on the profit and loss statement (audited or unaudited) must be supported by figures reported on the business account statements or other documentation.

Loan proceeds from a Payroll Protection Plan (PPP) or other similar COVID-19 related program are not considered business assets to use as a down payment, closing costs, or reserves.




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