Servicing Guide

Published September 9, 2020

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How is the Housing-Expense-to-Income Ratio calculated when evaluating a borrower for a Fannie Mae Mortgage Release?

The servicer must determine the borrower’s housing expense-to-income ratio as outlined in Evaluating a Borrower’s Ability to Make a Cash Contribution in D2-3.3-02, Fannie Mae Mortgage Release (Deed-in-Lieu of Foreclosure).

The borrower's monthly gross income is defined as the borrower's monthly income amount before any payroll deductions and includes the following items, as applicable:

  • wages and salaries;
  • overtime pay;
  • commissions;
  • fees;
  • tips;
  • bonuses;
  • housing allowances;
  • other compensation for personal services;
  • Social Security payments (including Social Security received by adults on behalf of minors or by minors intended for their own support); and
  • monthly income from annuities, insurance policies, retirement funds, pensions, disability or death benefits, rental income, and other income such as adoption assistance.

Note: The servicer must not consider unemployment insurance benefits or any other temporary sources of income related to employment (such as severance payments), as part of the monthly gross income for mortgage loans being evaluated for a Fannie Mae Mortgage Release.
 
The servicer must then divide the borrower’s monthly housing expense on the property securing the mort- gage loan, which includes the following items (as applicable), by the borrower’s monthly gross income:

  • P&I;
  • property and flood insurance premiums;
  • real estate taxes;
  • ground rent;
  • special assessments;
  • HOA dues (including utility charges that are attributable to the common areas, but excluding any utility charges that apply to the individual unit); 
  • co-op corporation fee (less the pro rata share of the master utility charges for servicing individual units that is attribut- able to the borrower’s unit); and
  • any escrow shortage currently included as part of the full monthly contractual payment.

Note: The servicer must exclude monthly mortgage insurance premiums form the monthly housing expense-to- income calculation.

For more information please see F-1-14, Processing a Fannie Mae Mortgage Release (Deed-In-Lieu of Foreclosure)

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