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Self-Employed Borrower: Form 1084 Part I - Personal Tax Returns October 2019 ©2019 Genworth Financial, Inc. All rights reserved.
Self-Employed Borrower:Form 1084 Part I - Personal Tax Returns
October 2019
©2019 Genworth Financial, Inc. All rights reserved.
Investors (Fannie Mae, Freddie Mac, Private Investors) require it to be
determined that self-employed borrowers demonstrate the financial
ability to repay the mortgage.
– History
– Income calculation
– Continuance / Stability of income
Lender Responsibility
1Fannie Mae Cash Flow Analysis Form (Form 1084)
Objective
Learn to use the Fannie Mae Cash Flow Analysis (Form 1084) and data
from tax returns to calculate supportable self-employed borrower
income.
– W-2 wages from a business owned by the borrower
– Income from a Schedule C (Sole Proprietor)
– Consideration of Capital Gains & Losses Schedule D
– Net Rental Income from Schedule E
2Fannie Mae Cash Flow Analysis Form (Form 1084)
Self-Employment Fannie Mae
3Fannie Mae Cash Flow Analysis Form (Form 1084)
https://www.fanniemae.com/content/guide/selling/b3/3.2/01.html
Self-Employment Fannie Mae
4Fannie Mae Cash Flow Analysis Form (Form 1084)
Fannie Mae 2019 Selling Guide B3-3.2-01, Underwriting Factors and
Documentation for a Self-Employed Borrower (12/04/2018)
Self-Employment Fannie Mae
5Fannie Mae Cash Flow Analysis Form (Form 1084)
Fannie Mae 2019 Selling Guide B3-3.2-01, Underwriting Factors and
Documentation for a Self-Employed Borrower (12/04/2018)
Self-Employment Fannie Mae
7Fannie Mae Cash Flow Analysis Form (Form 1084)
Fannie Mae 2019 Selling Guide B3-3.2-01, Underwriting Factors and
Documentation for a Self-Employed Borrower (12/04/2018)
Can checking the Self Employed Indicator to “Yes”
increase the risk of the loan when evaluated by DU?
YesNo
Does Borrower Own 25% Or More Of A
Business?
12Fannie Mae Cash Flow Analysis Form (Form 1084)
Training Tools and Information
Fannie Mae Cash Flow Analysis Form (Form 1084) 14
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Training Tools and Information
Fannie Mae Cash Flow Analysis Form (Form 1084) 1515
You’ll Need Calculators-
Fannie Mae Cash Flow Analysis Form (Form 1084) 16
Fannie Mae’s 1084
Fannie Mae Cash Flow Analysis Form (Form 1084)17
You’ll Need
18Fannie Mae Cash Flow Analysis Form (Form 1084)
The Case Study
You will be working with John and Mary Homeowner who:
– Own a Schedule C business called (John)
– Have schedule B interest and dividend income
– Have capital gains/loss activity reported on a Schedule D
– Own an existing rental property shown on a Schedule E
– Own 35% of an LLC called Dallas Designers (Mary)
• Reported on a Partnership Return 1065
• Mary receives a K-1
– Own 100% of an S Corporation called Wellness World, Inc. (John)
• John receives a K-1
• 1120S Business Tax Return
• John receives a W-2 Wage Statement from the business
19Fannie Mae Cash Flow Analysis Form (Form 1084)
Review for:
– Identifiers
• Name
• Address
• Social Security Number
– All pages and schedules
– Any Red Flags
– Date
• Most recent
– Signatures
Form 1040
21Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 2
Calculator and Quick Reference Guide
Access your Quick Reference Guide 1084 Form and Case Study
22Fannie Mae Cash Flow Analysis Form (Form 1084)
Review for:
– Wages are now reported on line 1
Form 1040
23Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 2
Schedule 1
24Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 3
Do Our Applicants Have Ownership?
Is this W-2 wage for Self-Employed or Salary income? John said he
“owned an S Corp…How do we verify if someone has ownership an S
Corp when we looking at personal returns?
25Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 1
Review for:
– S Corps and partnerships still
report on Line 17 but now on
Schedule 1….
– How do you know you need a
Schedule 1?
Form 1040
26Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 2
Schedule 1
27Fannie Mae Cash Flow Analysis Form (Form 1084)
Let’s look at the E…
Page 3
Schedule E to Validate Ownership
28Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 12
1120S K-1
29Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 28
John is 100% owner
Review Form 1040, Line 7 for any additional W-2 Wages
– Review all W-2’s filed
– Determine if applicant owns 25% or more of the business
• If yes, it is considered self-employed income
• If no, calculate that income on a different form or separately
Any Other W-2 Wages?
30Fannie Mae Cash Flow Analysis Form (Form 1084)
*Use of the W-2 wages is subject to the viability of the business
*
Schedule E to Validate Ownership
31Fannie Mae Cash Flow Analysis Form (Form 1084)
Don’t forget to ask for both K1’s. Who has ownership in Dallas Designers?
1065 K-1
32Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 17
Mary is 35% owner
Interest and Dividends
Don’t use unless needed for
qualifying
– Two year history of stable receipt
and likelihood of continuance
required
– Only use when earned from
assets owned by “a business
only”
– Typically will say “From K-1” or
from the business the borrower
owns
– Check investor overlays before
using
33Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 6
Interest and Dividends
34Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 6
Schedule C
35Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 7
Schedule C
36Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 7
Schedule C
37Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 7
Schedule C
38Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 7
Schedule C
39Fannie Mae Cash Flow Analysis Form (Form 1084)
Schedule C
40Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 7
Schedule C
41Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 7
Schedule C
42Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 7
Schedule C
43Fannie Mae Cash Flow Analysis Form (Form 1084)
Schedule C
44Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 7
Schedule C
45Fannie Mae Cash Flow Analysis Form (Form 1084)
Schedule C
46Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 7
Schedule C
47Fannie Mae Cash Flow Analysis Form (Form 1084)
Schedule C
Only the $999 amortization &
Casualty Loss of $2,000 is added back.
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Page 8
Schedule C
49Fannie Mae Cash Flow Analysis Form (Form 1084)
Schedule C Line 9 - Car and Truck Expenses
50Fannie Mae Cash Flow Analysis Form (Form 1084)
Use This Depreciation Adjustment Option Only When Investor Policy
Allows And The Adjustment Is Needed To Qualify
Schedule C
Additional depreciation can be found by multiplying business miles on
44a x IRS depreciation factor for that year.
51Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 8
Schedule C
Use This Depreciation Option Only When Investor Policy Allows And The
Adjustment Is Needed To Qualify
52Fannie Mae Cash Flow Analysis Form (Form 1084)
Schedule C
Verify 4562 is for the Schedule C
53Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 13 & 14
Schedule C
54Fannie Mae Cash Flow Analysis Form (Form 1084)
Schedule C - Other
Car & Truck Expenses Worksheet
56Fannie Mae Cash Flow Analysis Form (Form 1084)
Pages 15 & 16
Schedule D - Capital Gains
Don’t use unless needed
for qualifying
– Two year history, stable
receipt and likely to continue
– Check investor overlays
before using
– Only enter on the worksheet
if coming from a self-
employed source
– Let’s Review the 1040
Schedule 1, Line 13
57Fannie Mae Cash Flow Analysis Form (Form 1084)
Pages 3, 9, 10
Schedule D
Where Did The $13,544 Loss On Line 6 Come From?
The 1040, Schedule 1 Showed A $3,000 Loss.
58Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 9
Schedule D
59Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 10
– Locate Calculator and Quick Reference
Guide for Rental Income
– Turn to Schedule E, Part I, Rentals
– Rental Income has been removed from
the Cash Flow Analysis Form
Genworth Rental Income Calculator
61Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 11
Mortgage Statement/Payment Coupon
A mortgage statement/payment coupon can verify:
– If loan is impounded or escrowed
– What property is associated with the mortgage payment
– Current tax and insurance information
– Current HOA dues: most investors want verification PUD, Condo or Coop
63Fannie Mae Cash Flow Analysis Form (Form 1084)
PITI $1,637 (verified on mortgage statement) + $265 (verified HOA) = $1,902
64Fannie Mae Cash Flow Analysis Form (Form 1084)
65Fannie Mae Cash Flow Analysis Form (Form 1084)
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2018 Schedule E Rental Income
66Fannie Mae Cash Flow Analysis Form (Form 1084)
67Fannie Mae Cash Flow Analysis Form (Form 1084)
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2018 Schedule E Rental Income
68Fannie Mae Cash Flow Analysis Form (Form 1084)
69Fannie Mae Cash Flow Analysis Form (Form 1084)
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2018 Schedule E Rental Income
70Fannie Mae Cash Flow Analysis Form (Form 1084)
71Fannie Mae Cash Flow Analysis Form (Form 1084)
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2018 Schedule E Rental Income
72Fannie Mae Cash Flow Analysis Form (Form 1084)
73Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 11
2018 Schedule E Rental Income
74Fannie Mae Cash Flow Analysis Form (Form 1084)
75Fannie Mae Cash Flow Analysis Form (Form 1084)
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2018 Schedule E Rental Income
76Fannie Mae Cash Flow Analysis Form (Form 1084)
77Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 11
2018 Schedule E Rental Income
78Fannie Mae Cash Flow Analysis Form (Form 1084)
79Fannie Mae Cash Flow Analysis Form (Form 1084)
Page 11
2018 Schedule E Rental Income
80Fannie Mae Cash Flow Analysis Form (Form 1084)
2018 Schedule E Rental Income
81Fannie Mae Cash Flow Analysis Form (Form 1084)
2018 Schedule E Rental Income
82Fannie Mae Cash Flow Analysis Form (Form 1084)
2018 Schedule E Rental Income
83Fannie Mae Cash Flow Analysis Form (Form 1084)
PITI $1,637 (verified on mortgage statement) + $265 (verified HOA) = $1,902
Compare “rental income” figure with loan application (Fannie Mae
Form 1003)
– Most systems calculate rental income from the REO section of the 1003
– Review the 1003 to verify what appears as rental income/rental loss
– If the number is different, override your system to reflect the true income/loss
based on the tax returns
Net Rental Income
84Fannie Mae Cash Flow Analysis Form (Form 1084)
Genworth Rate Express®
Fannie Mae Cash Flow Analysis Form (Form 1084) 85
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Genworth Underwriting Guidelines
Fannie Mae Cash Flow Analysis Form (Form 1084) 86
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LOS Connections
Fannie Mae Cash Flow Analysis Form (Form 1084) 87
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Training Tools and Information
Fannie Mae Cash Flow Analysis Form (Form 1084) 88
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Training Tools and Information
Fannie Mae Cash Flow Analysis Form (Form 1084) 89
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Additional MI Site Information
Fannie Mae Cash Flow Analysis Form (Form 1084) 90
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➢ ActionCenter®: 800 444.5664
➢ Your Local Genworth
Regional Underwriter
➢ Your Genworth Sales
Representative
Your Genworth Resources
Fannie Mae Cash Flow Analysis Form (Form 1084) 9191
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Fannie Mae Cash Flow Analysis Form (Form 1084) 9292
