Freddie Mac Single-Family Seller/Servicer Guide 5305.2 — Automated income assessment with Loan Product Advisor® using account data for other income

This section contains: ■ Overview ■ Eligible income types ■ Underwriting requirements ■ Data submission requirements, representation and warranty relief eligibility and documentation requirements ■ Internal Revenue Service (IRS) Form 4506-C requirements

(a) Overview Representation and warranty relief eligibility is contingent on the Seller’s compliance with all requirements as set forth in this section. Asset and income modeler (AIM) automated income assessment using account data, provides Sellers with the option to use Loan Product Advisor® to determine whether the Seller is eligible for relief from enforcement of certain representations and warranties related to the Borrower’s income. The Seller must obtain the Borrower’s account data and submit all required data and information to Loan Product Advisor. Based on the data submitted, Loan Product Advisor will assess for representation and warranty relief eligibility and return the results of the assessment on the Feedback Certificate. The method to calculate income assessed by Loan Product Advisor may differ from income calculated using the methods described in Section 5305.1.

(b) Eligible income types The following income types, as described in Section 5305.1, are eligible for an automated income assessment using account data: ■ Alimony, child support or separate maintenance payments ■ Retirement income from social security and pensions ■ Social Security disability benefits ■ Social Security Supplemental Security Income (SSI) ■ Social Security Survivors benefits ■ VA disability compensation

(c) Underwriting requirements (i) General underwriting requirements The Seller must have no knowledge, information or documentation that contradicts an expectation that the income will continue for at least the next three years. The Seller must confirm: ■ Each account on the verification report is owned by at least one Borrower ■ All assets shown on the verification report are in U.S. dollars located in a U.S. or State-regulated financial institution ■ That the payor(s) is one of the following by using the information in the Mortgage file: ❑ The pension fund(s) ❑ The Social Security Administration or VA, and/or ❑ For alimony, child support or maintenance payments, that the payments are made either by, or on behalf of, the responsible party identified in the legally binding documentation (i.e., signed court order, final divorce degree, legally binding separation agreement, legally binding child support agreement or other legally binding documentation). Note: For alimony, child support or separate maintenance payments documentation requirements, see Section 5305.2(d)(iii) below. (ii) Age of documentation For the age of the documentation, the expiration date of the verification report reflected on the Last Feedback Certificate complies with the requirements in Section 5102.4.

(d) Data submission requirements, representation and warranty relief eligibility and documentation requirements (i) Data submission requirements For Mortgages with an automated income assessment using Loan Product Advisor, the Seller must: ■ Submit the income amount used to underwrite the Mortgage to Loan Product Advisor ■ Investigate and resolve any inconsistent or contradictory information between the verification report, information contained in Form 65, Uniform Residential Loan Application (including the Borrower’s income and employment representations), and the Mortgage file and, if applicable, resubmit the correct information to Loan Product Advisor ■ If after the initial submission, the Seller obtains an updated verification report, the Seller must resubmit the account data to Loan Product Advisor (ii) Representation and warranty relief results on Feedback Certificate If multiple Loan Product Advisor submissions are made, Seller’s eligibility for representation and warranty relief will be based on the results on the Last Feedback Certificate. When income representation and warranty eligibility results are provided on the Last Feedback Certificate, the representation and warranty relief available is described in the following table: Income representation and warranty relief based on Feedback Certificate result Eligibility result Representation and warranty relief Eligible The Seller is relieved from enforcement of the following representations and warranties: Income representation and warranty relief based on Feedback Certificate result Eligibility result Representation and warranty relief 1. Accuracy of the income calculation related to eligible income types on the verification report, and 2. Accuracy and integrity of the data on the verification report Partial When partial income representation and warranty relief is granted for a source(s) as confirmed by the feedback message, the Seller is relieved from enforcement of the following representations and warranties: 1. Accuracy of the income calculation related to eligible income types on the verification report, and 2. Accuracy and integrity of the data on the verification report Not eligible The Seller is not eligible for relief from enforcement of representations and warranties related to the Borrower’s income. Unavailable The Seller is not eligible for relief from enforcement of representations and warranties related to the Borrower’s income. (iii) Documentation requirements based on representation and warranty relief result on Feedback Certificate When income representation and warranty eligibility results are provided on the Last Feedback Certificate, the Seller must maintain in the Mortgage file the income documentation indicated on the Last Feedback Certificate in lieu of other documentation required in Section 5305.1. Additional documentation requirements are described in the following table: Documentation requirements based on representation and warranty relief result on the Feedback Certificate Eligibility result Income documentation requirements Eligible The Seller must maintain the verification report in the Mortgage file. When alimony, child support or separate maintenance payment income is used, the Seller must maintain in the Mortgage file: ■ A copy of the legally binding documentation verifying the payor’s obligation for the previous six months, including the amount and the duration of the obligation, and ■ For child support income, evidence of the ages of the children for which child support is received When there are multiple income sources and one or more is eligible for income representation and warranty relief, for the income source(s) not eligible for representation and warranty relief, the Seller must either: 1. Verify and document the income as required by the Guide, or 2. Remove the income and resubmit the Mortgage to Loan Product Advisor Partial The Seller must maintain the verification report in the Mortgage file. When alimony, child support or separate maintenance payment income is used, the Seller must maintain in the Mortgage file: ■ A copy of the legally binding documentation verifying the payor’s obligation for the previous six months, including the amount and the duration of the obligation, and ■ For child support income, evidence of the ages of the children for which child support is received When there are multiple income source(s) and one or more income sources are needed to qualify the Borrower, document the income source(s) as required by the feedback messages. Not eligible The income must be verified and documented as required by the Guide. Documentation requirements based on representation and warranty relief result on the Feedback Certificate Eligibility result Income documentation requirements Unavailable The income must be verified and documented as required by the Guide.

(e) IRS Form 4506-C requirements For Mortgages that receive an income representation and warranty result of either “Eligible” or “Partial” with a feedback message indicating that no further documentation is required for the income reflected on the verification report, if all of the Borrower’s income is from an eligible income type described above in Section 5305.2(b), the Seller does not need to obtain the following: ■ A signed IRS Form 4506-C (or alternate form acceptable to the IRS that authorizes the release of comparable tax information to a third party), or ■ A signed Commonwealth of Puerto Rico Form 2907 or Form 4506-C (or an alternate form that authorizes the release of comparable tax information to a third party), for income that is derived from sources in Puerto Rico, Guam or the U.S. Virgin Islands and is exempt from federal income taxation under the Internal Revenue Code For all other Mortgages, the IRS form 4506-C documentation requirements of Section 5302.5 apply.