Freddie Mac Revises Rental income Qualification Requirements

Freddie Mac issued Bulletin 2017-12 (Bulletin), announcing revisions to rental income qualification requirements. Per the Bulletin, the revisions include expanded requirements, additional specificity and guidance to support the determination of stability, reasonable expectation of continuance and calculation of rental income. The revised requirements include revisions with respect to: short-term and long-term rental income sources for refinance transactions where the rental income comes from properties owned in the prior calendar year; income from rental properties not owned in the prior calendar year; comparable rent data and Guide Form 1000 (Comparable Rent Schedule); accessory units; leases; net rental income calculations; the establishment of debt payment-to-income ratio; subject investment properties and non-subject investment properties; IRS Form 8825; and rental real estate held in partnerships or S corporations. The Bulletin also announces updates to Form 91 (used to document the income calculation for a self-employed borrower) to support the revisions for self-employed income announced in Bulletin 2016-19. The revised rental income qualification requirements are effective for mortgages with settlement dates on and after February 9, 2018 (however, lenders may implement the revised requirements in their entirety immediately). The updates to Form 91 went into effect August 9, 2017.

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