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#2280785 - 02/08/23 12:37 AM Gross income on commercial purpose loans
Brandon Offline
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On commercial purpose loans, are underwriters take the applicants gross income, subtract taxes, and subtract a living expenses estimate to calculate "cash to service debt". Would we use the cash to service debt as our gross income since this is what we relied on? Or would we use the gross income before deductions?

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#2280788 - 02/08/23 12:10 PM Re: Gross income on commercial purpose loans Brandon
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Gross income is before deductions. It is the figure that you start with.
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#2280789 - 02/08/23 01:37 PM Re: Gross income on commercial purpose loans Brandon
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To be clear, you relied on the gross income. You just relied on other things too in order to get to your "cash to service debt," which HMDA doesn't care about.

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#2280791 - 02/08/23 01:41 PM Re: Gross income on commercial purpose loans Brandon
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Thanks for the help, our loan compliance officer suddenly quit so I am trying to to scrub the lar with little experience. I see that is has been done inconsistent.

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#2280794 - 02/08/23 02:18 PM Re: Gross income on commercial purpose loans Brandon
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I am trying to to scrub the lar with little experience.

Just a side note since you state these are business/commercial purpose loans and asking about gross income I am assuming these loans are being made to individuals and the purpose of the loan falls within the definition of a home purchase, refinancing or home improvement.

If the applicant/borrower or the co-applicant/borrower is a non-natural person then income is reported NA (see page I-47 in the 2022 HMDA Reporting -Getting it Right guide). If the loan's purpose does not meet the definition for a home purchase, refinancing or home improvement the loans aren't reportable (see 1003.2 for the definitions).
Last edited by Dan Persfull; 02/08/23 03:52 PM.
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#2280796 - 02/08/23 02:32 PM Re: Gross income on commercial purpose loans Dan Persfull
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We did have an issue where short-term rentals were on the Lar so I had to remove these.

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#2280817 - 02/08/23 07:08 PM Re: Gross income on commercial purpose loans Brandon
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If the bank applicants are individuals and the bank uses Global Cash Flow instead of Gross Annual Income would those also be reported as NA?
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#2280821 - 02/08/23 07:41 PM Re: Gross income on commercial purpose loans Brandon
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What is a Global Cash Flow?
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#2280823 - 02/08/23 07:52 PM Re: Gross income on commercial purpose loans Brandon
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Here's how underwriting defines it: "Global Cash Flow is the combined personal income and outstanding debt combined with income and debt of all entities in which they have 20% or more ownership in. "
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#2280824 - 02/08/23 07:57 PM Re: Gross income on commercial purpose loans Brandon
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Depends on if you collected and relied on their gross annual income to figure out what their global cash flow was. I'm guessing that you did, so you would report the gross income. I'm not exactly sure how you would calculate the global cash flow for an individual without using their income, but as randy noted, it's not a term that's defined, so you can calculate it how you want.

You would report DTI as NA.

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#2280825 - 02/08/23 08:02 PM Re: Gross income on commercial purpose loans Brandon
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Thank you
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#2280826 - 02/08/23 08:54 PM Re: Gross income on commercial purpose loans Brandon
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IF you are combining personal income with that of businesses that they have a 20% stake in, then you are not using gross personal income in your underwriting.
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#2280828 - 02/08/23 10:09 PM Re: Gross income on commercial purpose loans Brandon
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Thanks Randy.
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#2280957 - 02/10/23 07:53 PM Re: Gross income on commercial purpose loans rlcarey
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So if you used global income (which includes personal income) would your report NA for income?
Last edited by Brandon; 02/10/23 07:54 PM.
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#2280975 - 02/10/23 11:54 PM Re: Gross income on commercial purpose loans Brandon
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If you credit underwriting considers a combination of personal income and income from business entities that is not passed to the individual in the form of income, how can you report it. They said that they are combining personal income with that of businesses that they have a 20% stake in. So, I have $10 of personal income and my business have $500,000 in income. You think reporting $10 is of any value? You are not basing the decision on gross personal income.
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