How many years of tax returns does Freddie Mac require for rental income?

Freddie Mac announced changes to rental income requirements in Bulletin 2018-19 issued October 31, 2018.  The significant changes are outlined below.

Rental Income to Qualify

Freddie Mac has implemented the following requirements when using rental income for qualifying:

• Borrowers must own a primary residence in order to use the rental income from the subject property to qualify when purchasing a rental property or converting a primary residence to a rental property. Rental income may not be used for qualifying if the borrower does not own a primary residence.
• Borrower’s purchasing a rental property or converting their primary residence to a rental property are subject to the following restrictions if the borrower does not have a minimum of 1-year investment property management experience:
  • The rental income may only be used to offset the PITI payment of the rental property, and
  • Any rental income exceeding the PITI payment cannot be added to the borrower’s gross monthly qualifying income
• Freddie Mac also removed the requirement that limited the net rental income used for qualifying to 30% of the borrower’s monthly qualifying income if the borrower did not have a minimum of 1-year history of rental property management

Rental Income Documentation

• Two (2) years’ tax returns will no longer be required; only the borrower’s most recent tax return required. Rental income must be annualized unless documentation provided the property was renovated or purchased late in the prior calendar year

Freddie Mac’s updated rental income requirements apply as follows:

• Loans submitted on or after April 12, 2019 must follow Freddie Mac’s new guidelines
• Loans submitted prior to April 12, 2019 have two options:
  • Freddie Mac’s current rental income requirements may be followed as long as the loan funds no later than May 24, 2019, OR
  • Freddie Mac’s new rental income requirements may be followed

The Homebridge Freddie Mac guidelines have been updated with this information and posted on the Homebridge website at www.homebridgewholesale.com.

For all LPA approved conventional loans, PennyMac is aligning with the updates announced in Freddie Mac Bulletin 2017-12 regarding rental income and self-employed income changes. Lenders may implement these changes earlier, however, loans using the current rental income calculation must be delivered to PennyMac on or before January 16th and purchased on or before January 29th. All loans delivered on or after January 17th must be underwritten to the updated guidelines.

Due to the complex nature of the changes, Lenders are encouraged to review both Freddie Mac Bulletin 2017-12 and Section 5306.1 in Freddie Mac’s Guide for complete details. High level summary of the changes include:

Microsoft has responded to a list of concerns regarding its ongoing $68bn attempt to buy Activision Blizzard, as raised by the UK's Competition and Markets Authority (CMA), and come up with an interesting statistic.

In response to continued questions over whether Microsoft owning Call of Duty would unfairly hobble PlayStation, Microsoft claimed that every COD player on PlayStation could move over to Xbox, and Sony's playerbase would still remain "significantly larger" than its own.

Microsoft does not go into detail on its mental arithmetic here, but does note elswhere in its comments that PlayStation currently has a console install base of 150 million, compared to Xbox's install base of 63.7 million.

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That claim is part of a range of comments given to Eurogamer sister site GamesIndustry.biz in response to the CMA's latest report, which otherwise mostly repeats many of the same concerns raised by the UK regulator - and others around the world - already.

For those following the case, the CMA's latest intervention will not come as a surprise - it is the next step on the regulator's recent roadmap for how and when it will weigh in with its final ruling. This month, we were due the CMA's October "issues statement" - and it seems that this is the document to which Microsoft has now publicly responded.

The usual topics are covered - surrounding the potential for the deal to harm competitors should Microsoft gain too much of an advantage owning Activision Blizzard franchises (mainly, Call of Duty) and therefore being able to leverage their brand power to become a dominant market leader in the console market and cloud streaming.

Specifically, the CMA sees potential for the deal to harm Sony but also other streaming services such as Google (perhaps a moot point now), Amazon and Nvidia.

"Having full control over this powerful catalogue, especially in light of Microsoft's already strong position in gaming consoles, operating systems, and cloud infrastructure, could result in Microsoft harming consumers by impairing Sony's – Microsoft's closest gaming rival – ability to compete," the CMA wrote, "as well as that of other existing rivals and potential new entrants who could otherwise bring healthy competition through innovative multi-game subscriptions and cloud gaming services."

In response, Microsoft said such "unsupported theories of harm" were not enough to even warrant the CMA's current Phase 2 investigation - which was triggered on 1st September.

"The suggestion that the incumbent market leader, with clear and enduring market power, could be foreclosed by the third largest provider as a result of losing access to one title is not credible," Microsoft told GamesIndustry.biz.

"While Sony may not welcome increased competition, it has the ability to adapt and compete. Gamers will ultimately benefit from this increased competition and choice.

"Should any consumers decide to switch from a gaming platform that does not give them a choice as to how to pay for new games (PlayStation) to one that does (Xbox), then that is the sort of consumer switching behavior that the CMA should consider welfare enhancing and indeed encourage. It is not something that the CMA should be trying to prevent."

The CMA is due to notify Microsoft of its provisional findings in January 2023, at which point it can seek possible remedies to any sticking points raised. The regulator's final report - and overall ruling - will then be published no later than 1st March next year.

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