[Anonymous]

We are having a somewhat difficult time in determining what constitutes stable income. What is considered an acceptable length of continuance? For example, we have one instance of investment income being received from a parent. Looking at the account balance, it would appear it can continue for approximately 4 more years. In another situation, we have a note receivable for a piece of property that was sold that shows it will continue until 11/01/2022 (about 8 years). The old rule in Freddie Mac processing was 3 years being sufficient. I have been unable to find anything confirming the expectation under the new rules. Help!

Topic

[rcooper]

There was originally a three year requirement in Appendix Q, but it was amended in July of 2013 to eliminate that specific time frame under the stability of income section. You’ll find a discussion of this in the document linked below on page 77 (the discussion begins on page 74).
https://files.consumerfinance.gov/f/201307_cfpb_final-rule_titlexiv.pdf

[Anonymous]

While the above link was somewhat helpful, it doesn’t seem to really deal with situations like I have had. In addition to the above stated situation, I have encountered a customer who has new contracts in place for income that will be 1099 and reported on schedule C. The contract shows a 1 year term and is automatically renewable if she meets all the conditions. When I read the small entity compliance guide, it even suggests that using a current P&L from a rancher could only be used if an accountant reviewed it. I really don’t know where we are left on these kinds of things. What constitutes continuous and stable in these kinds of deals?

[rcooper]

I’m not aware of anything, but I’ll do a little more digging to see if I can find more specific criteria.

[jholzknecht]

The following, from the Introduction to Appendix Q, is less than fully helpful, but it makes clear that when Appendix Q is lacking detail you may use guidance from other sources,(i.e.; FNMA, etc.). If you can’t find support for the source of income then you must exclude it from Appendix Q consideration. You would also have the option of making the loan under another ATR option that does not require use of Appendix Q.

Where guidance issued by the U.S. Department of Housing and Urban Development, the U.S. Department of Veterans Affairs, the U.S. Department of Agriculture, or the Rural Housing Service, or issued by the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac) while operating under the conservatorship or receivership of the Federal Housing Finance Agency, or issued by a limited-life regulatory entity succeeding the charter of either Fannie Mae or Freddie Mac (collectively, Agency or GSE guidance) is in accordance with appendix Q, creditors may look to that guidance as a helpful resource in applying appendix Q. Moreover, when the following standards do not resolve how a specific kind of debt or income should be treated, the creditor may either (1) exclude the income or include the debt, or (2) rely on Agency or GSE guidance to resolve the issue. The following standards resolve the appropriate treatment of a specific kind of debt or income where the standards provide a discernible answer to the question of how to treat the debt or income. However, a creditor may not rely on Agency or GSE guidance to reach a resolution contrary to that provided by the following standards, even if such Agency or GSE guidance specifically addresses the particular type of debt or income but the following standards provide more generalized guidance.

[Author]

Replies