We use the small creditor portfolio exemption, so we only follow ATR rules. Wondering how other Small Creditors are calculating the income on self employed borrowers that do not have a W-2. Are you using the Appendix Q guidelines for this? Thanks for any contribution...

You would use at least their last 2 years Tax Returns and then you would need 3rd party prepared interim financial statements for YTD income.

The dilemma we're having with tax returns is...we're not certain exactly what amount to use. Total Income or Adjusted Gross. And what deductions s/be made (ex: self employment tax and self employment health insurance deduction).

I suppose my question is this: Can we make an internal decision (and be consistent, of course)stating what we are going to count and discount(reasonably)?

Thanks in advance...

When the new stuff started, they sent out the Fannie 1084B income analysis spreadsheet to all the loan officers to use for self employed. According to our compliance officer yes, the key (as she understands) is to be consistent bankwide.