I have always assumed that the income used in determining income levels were based on a gross figure and not the AGI. I can't find anything that comments on this either way.

Does anyone know for sure if it's gross or adjusted that should be used?

The HMDA GIR states:
If an application relates to a one-to-four- family dwelling, enter the total gross annual income your institution relied on in making the credit decision. For example, if your institution relied on an applicant’s salary to compute a debt-to-income ratio, and also relied on the applicant’s annual bonus to evaluate creditworthiness, report the salary and the bonus. Report the amount in thousands, rounded to the nearest thousand ($500 should be rounded up to the next thousand).

So the standard is the income on which you relied when making the credit decision. Many banks will utilize AGI, but that is not mandatory. If you look at the HUD programs, when they refer to "income" they mean one of three definitions: (1) AGI or (2) Part 5 CFR definition or (3) Census Long Form

I'm sorry Len, I should clarify.

If I am trying to determine if a person or family is LMI, is the gross income before adjustments the figure I should use?

Whichever gets the family below the Median family income or Federal Poverty Limit for that MSA!!!

Seriously BnS, I would guess income for purposes of HUD comparisons would be "adjusted" rather than "gross".

We just finished calculating the % of clients at our VITA sites and we used adjusted gross and compared that average to the MFI for the MSA.

The numerator will be the income you used for the credit decision. The denominator is going to be the HUD EMFI for the MSA nor non-MSA area in which the you are geo-coding the loan.
You can't use one income figure for the credit decision and another income figure for income classification of the borrower.

My FI has a scholarship fund for LMI students and this question has come up because of a particular application. If the gross income is used they will be over the 80% of MFI.

that is a tough one girl....

So your bank chose the parameters of the scholarship and qualified the applicants?

We try to find a nonprofit that will review all the information and recommend the families. I don't like having to be the "decider".

Now you did not make a loan right? There is no credit decision right?

So you should be able to chose, just be consistent and be ready to defend your choice.

There is no credit decision involved with this.

We choose the parameters which happen to be the student must come from an LMI family.

I wouldn't like to have to decide either. That's up to another department, I just provide the income guidelines.

I like the idea of using the adjusted gross but then again someone could be packing away a bunch of money into their 401k and then their AGI ends up looking like moderate income even though that's not the case. It defeats our purpose of trying to help LMI students with scholarships.

I guess if I get to pick the standard I would have to choose gross then. But I wonder what HUD uses to determine the MFI?

A follow up in case anyone is interested about Median Family Income.

I emailed the helpdesk at HUD which gave me this link:

24CFR5.609

In short:



So it appears that HUD uses gross income to determine MFI.

Not to throw a monkey wrench into this discussion, but there are many programs administered by HUD. If you check the "Affordable Housing" program, Title 42 - The Public Health and Welfare, Chapter 130 - National Affordable Housing Subchapter II - Investment in Affordable Housing you can find that they allow 3 different methods for calculating income under § 92.203 "Income Determinations":
1. “Annual income’’ as defined at 24 CFR 5.609 (except when determining the income of a homeowner for an owner-occupied rehabilitation project, the value of the homeowner’s principal residence may be excluded from the calculation of Net Family Assets)[this is the reference provided by BS]; or
2. Annual Income as reported under the Census long-form for the most recent available decennial Census. This definition includes:
i. Wages, salaries, tips, commissions, etc.;
ii. Self-employment income from owned non-farm business, including proprietorships and partnerships;
iii. Farm self-employment income;
iv. Interest, dividends, net rental income, or income from estates or trusts;
v. Social Security or railroad retirement;
vi. Supplemental Security Income, Aid to Families with Dependent Children, or other public assistance or public welfare programs;
vii. Retirement, survivor, or disability pensions; and
viii. Any other sources of income received regularly, including Veterans’ (VA) payments, unemployment compensation, and alimony; or
3. Adjusted gross income as defined for purposes of reporting under Internal Revenue Service (IRS) Form 1040 series for individual Federal annual income tax purposes.

So HUD does allow use of AGI for income determination purposes for the affordable housing programs. See 24 CFR Part 92

§ __.42(c)(1)(iv) – 3: When collecting the gross annual income of consumer borrowers, do institutions collect the gross annual income or the adjusted gross annual income of the borrowers?
A3. Institutions collect the gross annual income, rather than the adjusted gross annual income, of consumer borrowers. The purpose of income data collection in connection with consumer loans is to enable examiners to determine the distribution, particularly in the institution’s assessment area(s), of the institution’s consumer loans, based on borrower characteristics, including the number and amount of consumer loans to low-, moderate-, middle-, and upper-income borrowers, as determined on the basis of gross annual income.
The regulation does not require institutions to request or consider income information when making a loan; however, if institutions do gather this information from their borrowers, the agencies expect them to collect the borrowers’ gross annual income for purposes of CRA. The CRA regulations similarly do not require institutions to verify income amounts; thus, institutions may rely on the gross annual income amount provided by borrowers in the ordinary course of business.

the circumstance does not involve consumer borrowers CRAReg but qualifying a potential candidate for a scholarship...

at least that is what I remember...