Self-Employed COVID Overlay Release

Fannie Mae and Freddie Mac dropped a release regarding self-employed borrower COVID overlay.

Fannie and Freddie are removing the COVID need for P&L and 3 months business bank statements if current tax return is 2020 or newer 2021.

This is retired for NEW APPLICATIONS as of Feb 2, 2022 with tax returns dated 2020 and 2021.

Full release details from Fannie and Freddie:

“Effective immediately we are retiring the COVID-19 temporary requirements for borrowers with qualifying income derived from self-employment provided the most recent federal income tax returns are not older than 2020. Lenders may follow standard Selling Guide policies with respect to self-employment income.

If the most recent federal income tax returns are dated before 2020, lenders must continue to apply the prior requirements, which are now described (unchanged) in the Attachment to this Lender Letter.

Note that the temporary requirements for Verification of Self-employment continue to apply to all loans using self-employment income to qualify.”

Requirements for Borrowers Using Self-Employment to Qualify:

  • Adds additional documentation and income analysis requirements for self-employed borrowers.
  • A YTD P&L (audited or unaudited) with a minimum of 3 months reported. If unaudited, also 3 months business depository account statements.
  • Also requires adjustment to business income calculation and clarifies sBA PPP are not considered business assets.
  • Retired for loans in process and new applications as of Feb. 2, 2022, with tax returns dated 2020 or 2021.

For more information, reach out to on of our experienced mortgage loan originators here.

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