Sandra Sweeney, MGIC senior customer trainer, walks through self-employed borrower income analysis in our latest Mortgage Connects podcast episode. Sandra details what income calculation tools and resources are available to assist you in your calculation of self-employed borrower income for tax year 2023. She highlights the IRS tax changes that will impact your cash flowing process and also details GSE guidelines changes in the past year that you'll need to take into consideration. Find out how you, too, can become SEB-proficient!
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Speaker 1:
Welcome to Mortgage Connects by MGIC, bringing you the latest insights from top mortgage professionals around the industry. I'm your host, Concepcion Carrero, and joining me today is MGIC's senior customer trainer and program designer, Sandra Sweeney. During this podcast, Sandra will be speaking to us about MGIC's self-employed borrower program. She will be going over what tools and resources we have available for you and giving us a heads up to any IRS or agency changes that may impact how we review and analyze self-employed borrower's income. Sandra, can you tell us a little bit about our SEB program, especially what updates and changes our listeners should be aware of?
Speaker 2:
Thank you, concepcion. You know I was recently asked what makes MGIC's self-employed training program so popular. I'm proud to say that MGIC has a strong history of offering comprehensive self-employed training designed to help folks master the foundational concepts in order to build their confidence when it comes to dealing with these complex borrowers. That training, along with much loved income calculation tools and other resources, are what our lender partners appreciate. We spend a considerable amount of time tracking any IRS changes, as well as any agency guideline changes that may affect the way we analyze self-employed income. Each year in February, we roll out our updated income calculation tools and shortly after that, our training includes case studies with our sample borrower tax returns for the most recent tax year. So I thought I would share with our listeners what resources we currently have for them when it comes to understanding and calculated self-employed income, as well as discuss what changes have occurred in the last year.
Speaker 2:
Our self-employed program was designed with a goal of making your life easier. Of course, when you receive a loan application, you discover that your borrowers have an interest in five different companies and own three rental properties. Your initial reaction might not be positive, because you know that you're going to be facing more work and possibly some challenges. However, I would like to remind mortgage professionals that self-employed individuals do know a lot of folks and, as such, they can become rich sources of referral for your business. And, of course, in our current lending environment, growing a referral-based business is paramount. Wherever you are in your journey of understanding the self-employed borrower, we are here to help. We offer seven different SEB webinars that will take you, step by step, through your journey to understanding the self-employed borrower. We take the mystery out of reviewing tax returns and analyzing businesses for stability of earnings and continuance of income. We give you the foundational tools that will prepare you to face any circumstance that you may encounter. We take you through the process that you need to develop. That goes beyond just plugging in numbers into a worksheet, and this will keep you out of trouble in the qualification process.
Speaker 2:
One of our biggest value ads are our income calculators. We constantly receive feedback from our lender partners telling us how helpful and user-friendly our worksheets are as tools in the correct calculation of self-employed income. They are especially helpful to those that are newer to the self-employed borrower, as they contain line-by-line help as well as built-in guidance and a separate help document. Our calculators can be found at mgiccom forward slash s, e, b and are currently updated for the tax year of 2023. We recently developed an all-in-one self-employed income calculator that incorporates four different worksheets in one Excel workbook. This includes the SAM Cash Flow Analysis Worksheet, the Liquidity Worksheet, the Comparative Analysis Worksheet, as well as the Profit and Loss Worksheet, so you should have everything you need to analyze your borrower's business income all in one calculator. Our calculator is offered in both macro-enabled and macro-free versions.
Speaker 2:
Okay, what's new when it comes to analyzing 2023 tax returns? Due to IRS changes, there were minimal line item changes, which have now been incorporated into our line-by-line guidance. The standard mileage deduction for 2023 is 65.5 cents per mile, and the portion that can be attributed to depreciation has now increased to 28 cents per mile. It should be noted that the temporary IRS provision allowing business owners to claim up to 100% of meals has now expired, so for tax year 2023, business owners will once again be capped at claiming 50% of the actual meal expenses.
Speaker 2:
Now, when it comes to Fannie Mae and Freddie Mac and the self-employed borrower, fannie Mae recently announced the creation of a new tool, income calculator, which is intended to assist lenders in accurately determining the monthly qualifying income for self-employed borrowers. Additional guidance was provided when borrowers have less than a two-year history of self-employment, confirming that at least one-year history is required. When it comes to documentation requirements for the self-employed borrower, fannie Mae is aligning a bit closer to Freddie Mac in that if your self-employed borrower's business has been in existence for five years and the borrower has had a history of ownership interest for the last five years, then only one year of personal and business tax returns will be required. Desktop Underwriter has been updated as of January 1, 2024.
Speaker 2:
Please pay close attention to the documentation requirements included in your DU findings. You know, concepción, I believe that knowledge leads to confidence. If you immediately become anxious when you find out that your self-borrower is self-employed, or if your eyesight blurs upon looking at tax returns, then please avail yourself of our MGIC SEB training tools and resources. I promise they will help you become SEB proficient. As always, please do not hesitate to reach out to your MGIC account manager or myself if we can support you in any way.
Speaker 1:
Zandra, thank you very much for the quick SEB insights and, just like Zandra mentioned, you can access the self-employed borrower and income analysis calculators by going to mgiccom backslash SEB. Thanks for listening. For all the latest industry insights, subscribe to MargeConnect on Apple, Google Podcast, Spotify, Amazon Music or go to margconnextcom.