TIP OF THE DAY- FREDDIE COMMISSION INCOME

TIP OF THE DAY- FREDDIE COMMISSION INCOME

 

Commission income

Following recent tax law changes, unreimbursed employee expenses of commissioned employees will no longer be documented on federal individual tax returns. Consequently, we are removing the requirements that when the Borrower’s commission income is greater than or equal to 25% of the total income from the commissioned employment that the Seller:

•               • Obtain complete federal individual income tax returns for the most recent two-year period; and

•               • When calculating income, deduct unreimbursed employee expenses reflected on Schedule A and Internal Revenue Service (IRS) Form 2106 (if applicable) of the Borrower’s federal individual income tax returns from the Borrower’s gross commission income

 

As a result of this change, the documentation and income calculation requirements will be the same for all commission income, regardless of its percentage of the total income from the commissioned employment.

The applicable Loan Product Advisor® feedback messages will be updated at a later date to reflect these changes. Until then, Sellers may disregard the feedback messages requiring tax returns covering a two-year period when commission income is greater than or equal to 25% of the total income from the commissioned employment.

Guide impacts: Sections 5302.4, 5303.3 and 5303.4

Automated income assessment eligibility

Effective for submissions and resubmissions to Loan Product Advisor on and after March 24, 2019

As a result of the above changes to our requirements for commission income, all commission income, regardless of its percentage of total income from the employment, will also be eligible for automated income assessment, which is part of Loan Product Advisor asset and income modeler (AIM). This expands the income sources eligible for this capability to include commission income greater than or equal to 25% of the total income from the commissioned employment.

justin brown