"Grossing up" means taking non-taxable sources of income (social security as an example), and adding a percentage (I've seen anywhere from 15-25%) to give it equal footing with gross W-2 wages.
Someone earning $24,000 in gross W-2 Income would have $2,000/month in gross monthly income.
Someone earning $19,200 in non-taxed social security annually would have gross monthly income of $1,600. Taking the $1,600 x 1.25 would provide a "taxable equivalent" of $2,000/month for determining "gross monthly income".
Usually, social security, disability, other types of public assistance, etc are recieved without being subject to income tax withholding. Grossing up that amount puts it on equal footing with W-2 earnings; comparing "apples to apples".
When doing this, a bank needs to be consistent in treatment, by either grossing-up or not grossing-up all types of non-taxed income.
Hope this helps...