I have a Denied loan with negative income and negative DTI. The only reference to negative income that I can find is Validity Edit V654-1, which says:

"Income must be either a positive or negative integer rounded to the nearest thousand or NA, and cannot be left blank."

Do we report negative income, or do we convert it to 0? If we convert to 0, what do we do with the DTI? I don't think it's right to report NA, because we made a credit decision based on the Income and DTI.

I have not had an instance of negative income, but if that's how you calculated your DTI, then I suppose that's how you report. I've still not quite figured out how a gross income can be negative though.

Now I HAVE reported several instances of DTI's that were well over 100% DTI

I can see the possibility of having negative net income, but can't see a way for gross to be negative.

I guess I'm getting caught on the income and DTI not "matching", but we're not reporting debt, so no one could re-calculate to know that the income reported is not the same income used in the DTI. It just seems strange to report the DTI as -17.057, but the income as approx. 481,000. After 24 month average of the corporate tax returns analysis we're getting the income as approx -866,000

Are you saying you are reporting a negative DTI? How can that be negative? I could see it being over 100% or something....but not negative.

(I mean...i get that if you try to divide a positive by a negative, you're gonna get a negative.....but A) I didn't think the FIG would let you report a negative % for DTI and B) I wouldn't try to figure a DTI off of a negative net figure).

Wait. What?

that the income reported is not the same income used in the DTI

Why?

There's no requirement that they match or that it can't be negative that I know of. Just the "gross annual income relied on" and the "the ratio of the applicant's or borrower's total monthly debt to the total monthly income relied on."

Because we have negative income, we are getting a negative DTI....per investor guidelines the income is calculated by averaging the analysis of the corporate tax returns (borrower owns the businesses, not a loan to a corporation) and the income comes out to -866,000. Our LOS is returning a DTI of -6.737/-17.057%

I don't have a DTI based on anything else.

I understand the math, but logically, wouldn't your DTI be 100% (or greater) in this case, since any debt will suck up any pennies found between the couch cushion at this point?

That's where i was going with the DTI too.......^^^^

If i have less money than zero dollars, then my logic says that my DTI must be greater than 100%.

I don't even understand what a -17.057% DTI is telling us about their debt, or their income.

It tells me they can't pay their debts with their income.

That's what a 150% DTI tells me.

That just means they can't pay 1/3 of their debts even if they do nothing but pay debts. If it's negative, they can't pay any of their debts.

Well, i guess this guy must be like Roger Miller and lack 14 dollars having 27 cents, so ......

True negative income to me just represents more debt, but then i don't get to play those tax games, so i don't know.

Well, debt is a positive figure and if you divide by negative income - you get a negative percentage.

I'm still lost on making this statement make sense. Why would the income reported be different than the income. They should be one and the same, good, bad or negative.

but we're not reporting debt, so no one could re-calculate to know that the income reported is not the same income used in the DTI

I'm also confused. How could the income relied upon not be the same as used when calculating the DTI?

We denied the loan due to negative income, which was calculated from tax returns (self employed borrower with corporate tax returns). The income calculations we are using are required by our credit policy and our investor's credit policy. I have seen income calculated this way for my entire Mortgage career.

Our LOS is giving us a negative DTI, which I completely understand is incorrect and should be over 100% (I need to look into how to adjust the LOS for this).

Here's where I start to get confused and I think I'm confusing everyone else...

Reg says report Gross Income relied on (also says "Income relied on") and everyone is of the opinion that you cannot have negative gross income. The "income" becomes negative due to calculating the cash flow.

If I dig into the file to determine and report the Gross Income we started with before calculating loss and expenses from the tax returns to satisfy our income calculation requirements, then I am not reporting the income that was used to calculate the DTI.

I have nowhere in my system to record and report the Gross Income with a DTI based on that number, and record the income and DTI that was calculated by the underwriter. If I separate them in this way, I am not really reporting what was relied on (negative income), which I believe is the intent of the regulation.

I don't know if this clarifies anything, or just muddies the waters even more.

In the past there was a general conensus among some of us that "gross" income could not be negative. In the preamble to the 2017 final HMDA amendments, however, the CFPB seems to say that a negative gross income can be listed on the LAR:

"Finally, the Bureau notes that the 2015 HMDA Final Rule and the 2018 FIG do not include any language that would bar a financial institution from reporting an applicant's gross annual income as “0” or even a negative number when that is the accurate figure that it relied on."

Thank You Adam!

@ HMDA Warrior, what did you decide to report for your DTI? We just ran into this scenario where the income was negative. Our LOS (Encompass) calculated the DTI for us (as usual) and it gave a negative DTI result as well. For now we have reported that negative DTI % until we can get some clarification.

I also wonder if you've ran into a similar situation where the customer provides a stated income, but once it is reviewed by an underwriter in the secondary market, it is determined that NONE of their stated income can be used.
As such, what would you report in the 'income' and 'DTI' fields?
Would you report income of "$0" and DTI of "100%"?
Our LOS wont calculate a DTI based off of a -0- number (I don't see how it could).

We have asked our external auditors and our state banking association and everyone is stumped.

Thanks!

Banker K - We have not yet pinned this down, but at this point we are leaning toward reporting the negative income and DTI

In your stated income scenario, we would report $0 Income if none of the income provided could be used and then I believe that we would report NA for the DTI. We didn't rely on a DTI for our credit decision once we determined that the income was unacceptable; that alone is enough information to render a credit decision.