I have been going through older posts and wanted to see if anyone received comments on how to report the DTI on a loan denied due to DTI and the income was 0. A few comments mentioned using n/a, which does not appear appropriate as a decision was made (denied due to DTI). Another person mentioned using 0 for DTI, which I understand to an extent but the debt exceeds the income. I wanted to reach out to see if anyone received further clarification that I was unable to find. I appreciate the help!

Someone applied for a loan and they have absolutely no income? How is that possible?

VOE came back and they were just laid off.

These are a few older posts I came across where portions speak to what I am asking. In one, a person asked and no one responded and I have the same question. I was not sure if others have gotten any clarity (applicant lost their job after submitting application).

https://www.bankersonline.com/forum/ubbthreads.php/topics/2256683/re-income-and-dti

https://www.bankersonline.com/forum.../negative-no-or-no-qualifying-income-dti

Thanks!

From page 28 in the 2022 GIR:

Enter, as a percentage, the ratio of the applicant’s or borrower’s total
monthly debt to the total monthly income relied on in making the credit
decision. Use decimal places only if the ratio relied upon uses decimal
places. The HMDA Platform can accept up to fifteen (15) decimal places
and can accept negative numbers for Debt-to-Income Ratio.
Example: If the relied upon debt-to-income ratio is 42.95, enter
42.95, not 43. If, however, your institution rounded the ratio up to
43% and relied on the rounded-up number, enter 43.

Silly question, wouldn't this result in an error though in the actual calculation? Debt 500 / 0 income = #DIV/0!

I would say you are not denying for the lack of income, but for a lack of a current job. Just because I changed jobs two weeks ago, you do not normally discount any money I made before that time as long as you thought I would earn the same amount in the new job.

They could have had other income besides employment income. Why wouldn't "income insufficient for amount of credit requested" be appropriate then as a basis of denial? They had income and lost their job in the middle of the application which was identified during the VOE process. They used the income as a basis of a credit decision. So due to this for the LAR, you would need to show 0 for income and have a DTI value based on my understanding. (Similar to the posts I added previously, similar instances occurred.)

Income does not vanish like that. Only future income vanishes.

Would you have proposed the denial reason to be "Other" and specify? I would be hesitant (initially) to use "unable to verify employment" because it was verified that there is no employment but perhaps I am overthinking. Thanks.

Well - either that or you have to figure out how to divide a number by 0, which is impossible. I guess I would be concerned that you found this out only through a VOE and the applicant told you nothing. Sounds like mortgage fraud and a SAR may be required.

Good point. It does look like the timing was just right though but gives cause to dig in more. Thanks

We had several of these types of denials during COVID, finding out after the loan application was approved that they were no longer employed when we did the Verbal VOE prior to closing. We know they were employed when we approved because approval requires a recent paystub. We subsequently issued a denial for Unable to Verify Employment.