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Fannie Mae - Unreimbursed Expenses

Did you know that Fannie Mae no longer requires Form 2106 for Borrowers earning commission income?

FNMA is removing the different treatment of commission income based on the percentage of employment income, thereby treating all commission income the same. 

Fannie Mae is:

  • Updating policy regarding commission income and unreimbursed business expenses due to recent changes made by the IRS that are effective with the reporting of 2018 federal income taxes. Note: This policy may be applied to 2017 tax returns as well.
  • Removing the requirements for IRS Form 2106.FNMA no longer requires tax return documentation or tax transcripts to identify unreimbursed business expenses. (See notes regarding DU Messaging below)
  • Changing the automobile allowance policy. The full amount of an automobile allowance may now be included as income and the lease or financing expenditure must be included as a debt in the calculation of the debt-to-income (DTI) ratio. (Note that a history of receipt of this income continues to be required.)
    • ​DU Messaging - DU messages reflecting these changes will be updated in a future release. Until then, you may disregard the requirement to obtain IRS Form 1040 or Form 2106 for commission income and automobile allowance. However, loan files that include qualifying income from an automobile allowance that is calculated following the “actual cash flow approach” must continue to include IRS Form 2106. This includes the practice of directly offsetting an automobile lease payment with an automobile allowance if the lease payment is captured as an expense on Form 2106. 

Please refer to the Fairway Guidelines for additional guidance.

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